SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 10, 1995
CHEVRON CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 1-368-2 94-0890210
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(State or other (Commission File Number) (I.R.S. Employer No.)
jurisdiction of
incorporation)
225 Bush Street, San Francisco, CA 94104
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(415) 894-7700
Item 5. Other Events.
------------
Chevron Corporation's 1994 Financial Statements (audited)
and Management's Discussion and Analysis of Financial
Condition and Results of Operations is attached hereto as
Exhibit 99.1 and made a part hereof.
Item 7. Financial Statements and Exhibits.
----------------------------------
(c) Exhibits.
99.1 Chevron Corporation's 1994 Financial Statements
(audited) and Management's Discussion and Analysis
of Financial Condition and Results of Operations.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: March 10, 1995
CHEVRON CORPORATION
By /s/ M.J. McAULEY
-------------------------
M.J. McAuley, Secretary
Exhibit 99.1
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
KEY FINANCIAL RESULTS
MILLIONS OF DOLLARS, EXCEPT PER-SHARE AMOUNTS 1994 1993 1992
- -------------------------------------------------------------------------------
Sales and Other Operating Revenues $35,130 $36,191 $38,212
Income Before Cumulative Effect of
Changes in Accounting Principles $ 1,693 $ 1,265 $ 2,210
Cumulative Effect of Changes
in Accounting Principles - - $ (641)
Net Income $ 1,693 $ 1,265 $ 1,569
Special Credits (Charges) Included in Income* $ 22 $ (883) $ 651
Per Share:
Income Before Cumulative Effect of
Changes in Accounting Principles $ 2.60 $ 1.94 $ 3.26
Net Income $ 2.60 $ 1.94 $ 2.31
Dividends $ 1.85 $ 1.75 $ 1.65
Return On:
Average Capital Employed 8.7% 6.8% 8.5%
Average Stockholders' Equity 11.8% 9.1% 11.0%
===============================================================================
* BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES.
Chevron's net income for 1994 was $1.693 billion, up 34 percent and 8 percent
from 1993 and 1992, respectively. However, special items in all years, and the
cumulative effect of adopting two new accounting standards in 1992, affected
the comparability of the company's reported results. Special items, after
related tax effects, increased earnings in 1994 by $22 million, decreased
earnings in 1993 by $883 million and increased earnings in 1992 by $651
million. Also, the cumulative effect of adopting two new accounting standards
reduced 1992 earnings $641 million. Excluding the effects of special items in
all years and the 1992 accounting changes, 1994 earnings of $1.671 billion
declined 22 percent from very strong operating earnings of $2.148 billion in
1993 and increased 7 percent from $1.559 billion in 1992.
OPERATING ENVIRONMENT AND OUTLOOK. Worldwide petroleum industry conditions
were weak throughout 1994. Crude oil prices were at a five-year low at the
beginning of the year. Although prices recovered somewhat during the year,
supplies remained plentiful. The company's U.S. realizations were, on average,
72 cents per barrel less than in the prior year, and its international
realizations declined $1.23 per barrel. Average crude oil prices have declined
for four consecutive years.
U.S. natural gas prices, after increasing the past two years, began falling in
1994 and averaged 22 cents per thousand cubic feet less than in 1993, as ample
supplies and mild weather held down prices. The company's international
natural gas prices fell by about the same amount.
Sales margins on refined products were depressed much of the year. For
example, in the United States, product prices averaged about $1 per barrel
less than in the previous year as highly competitive markets, particularly in
the East, held down prices. These market conditions tended to lengthen the
time lag for product prices to reflect the gradually increasing crude oil
costs during the year.
On the other hand, the chemicals industry experienced a dramatic turnaround
from the excess capacity and weak demand of the past four years. Strengthening
industrialized economies, particularly in the United States, resulted in
strong demand and higher prices - and Chevron's chemicals earnings rebounded
substantially.
All these industry conditions have continued into 1995. The company's posted
price for West Texas Intermediate (WTI), a benchmark crude oil, was $16.75 per
barrel at year-end 1994 and $17.50 at February 28, 1995. The Henry Hub natural
gas spot price, an industry marker, was $1.61 per thousand cubic feet at
year-end 1994 and $1.55 at February 28, 1995. U.S. refined products prices in
January 1995 were about flat with December. Planned major maintenance
shutdowns at two of the company's core refineries resulted in lower refinery
utilization rates, lower sales volumes and increased product purchases in the
early part of 1995. Chemicals operations remained strong.
Chevron began selling federally mandated reformulated gasoline January 1, 1995
in nine areas in the United States, accounting for about 20 percent of its
January gasoline sales volumes. The increased cost of manufacturing
reformulated gasoline has not yet been fully reflected in sales prices.
The company embarked on an aggressive program several years ago to increase
its competitiveness and achieve superior returns for its stockholders.
Businesses were restructured, marginal and non-core assets were divested and
the company's cost structure was significantly reduced. At
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the same time, the company has selectively pursued growth opportunities in its
areas of strength.
The company continues to review and analyze its operations and may incur
future charges related to the restructuring of its businesses and disposition
of marginal or non-strategic assets. In particular, the company is currently
reviewing its oil and gas operations in western Canada and options to maximize
the value of certain real estate operations located in California.
UNITED STATES REFINING AND MARKETING DEVELOPMENTS. In connection with the
previously announced restructuring of its U.S. downstream operations, Chevron
sold its Philadelphia refinery in August 1994 and its Port Arthur, Texas,
refinery in February 1995. The two refineries had a combined capacity of about
350,000 barrels per day or about 25 percent of the company's total U.S.
refining capacity prior to the sales. The Philadelphia refinery had been
operated as a merchant refinery, with its 175,000 barrels per day output sold
to independent petroleum marketers. Products for the company's marketing
system that were previously supplied by the Port Arthur refinery will be
obtained from other sources.
The restructuring reflected the company's strategy to focus its resources in
the West, Southwest and those parts of the South where the company's marketing
business is strongest. The smaller refinery organization is expected to be
more efficient, with improved cash flow and return on capital employed. The
disposition of the two refineries has also eliminated large capital
investments that would have otherwise been required.
In connection with the Port Arthur refinery sale, the company retained certain
environmental cleanup obligations. The company has accrued for presently
anticipated costs of $282 million, most of which will be expended over
approximately the next ten years. It is possible additional provisions may be
necessary in the future. The expenditures will be funded by future cash flows
from operations, with no material effect anticipated on the company's
liquidity.
INTERNATIONAL EXPLORATION AND PRODUCTION DEVELOPMENTS. Liquids production from
50 percent owned Tengizchevroil (TCO), a joint venture with the Republic of
Kazakhstan, averaged about 46,000 barrels per day in 1994, up from 30,000
barrels per day in 1993. At year-end 1994 TCO was producing about 65,000
barrels per day. With the completion of a second processing plant in December
1994, production capacity increased to 95,000 barrels per day and is scheduled
to increase to 130,000 barrels per day by the end of 1995. Beyond this, the
pace of further field development is dependent on the availability of
additional export capability. Production levels are dependent on monthly
export quotas set by Russia, under a transportation/exchange agreement, and
are currently set at 65,000 barrels per day. Chevron has been in prolonged
negotiations with the Caspian Pipeline Consortium, composed of the Republics
of Russia and Kazakhstan and the Sultanate of Oman, to agree on terms for an
export pipeline system that would enable the project to sell its output
directly to world markets.
Although the company's operations in Nigeria and the Angolan exclave of
Cabinda have been generally unaffected by the political uncertainty and civil
unrest that continues to exist in those countries, the company continues to
closely monitor developments. Chevron has significant oil producing properties
in both countries and has major development projects underway. In 1994, the
company's net share of production in Nigeria averaged about 130,000 barrels
per day, and in Angola about 100,000 barrels per day.
Chevron's partner in Nigeria, the government-owned Nigerian National Petroleum
Corporation (NNPC) has fallen behind in paying its cash calls to Chevron, as
well as to other oil companies operating in Nigeria. However, NNPC continues
to make payments and the company believes all amounts owed it will ultimately
be paid.
The Nigerian government effectively devalued its currency, the naira, in
January 1995 by changing from a fixed exchange rate to a floating, free market
rate. This devaluation did not have a significant effect on the financial
position of the company's Nigerian subsidiary and is not expected to have a
significant effect on its ongoing operations.
ENVIRONMENTAL MATTERS. Virtually all aspects of the businesses in which the
company engages are subject to various federal, state and local environmental,
health and safety laws and regulations. These regulatory requirements continue
to increase in both number and complexity, and govern not only the manner in
which the company conducts its operations, but also the products it sells.
Most of the costs of complying with myriad laws and regulations pertaining to
its operations and products are embedded in the normal costs of conducting its
business.
FS-2
Using definitions and guidelines established by the American Petroleum
Institute, Chevron estimates its worldwide environmental spending in 1994 was
about $1.5 billion for its consolidated companies. Included in these
expenditures were $683 million of environmental capital expenditures, and $638
million of costs associated with the control and abatement of hazardous
substances and pollutants from ongoing operations. The total amount also
includes spending charged against reserves established for future
environmental cleanup programs (but not non-cash provisions recorded during
the year).
In addition to the costs for environmental protection associated with its
ongoing operations and products, the company (as well as other companies
engaged in the petroleum or chemicals industries) incurs expenses for
corrective actions at various facilities and waste disposal sites. An
obligation to take remedial action may be incurred as a result of the
enactment of laws, such as the federal Superfund law, or the issuance of new
regulations or as the result of the company's own policies in this area.
Accidental leaks and spills requiring cleanup may occur in the ordinary course
of business. In addition, an obligation may arise when operations are closed
or sold. Most of the expenditures to fulfill these obligations relate to
facilities and sites where past operations followed practices and procedures
that were considered acceptable under standards existing at the time, but now
require investigatory and/or remedial work to meet current standards.
During 1994, the company recorded $505 million of before-tax provisions to
provide for environmental remediation efforts, including Superfund sites.
Actual expenditures charged against these provisions and other previously
established reserves amounted to $182 million in 1994. At year-end 1994, the
company's environmental remediation reserve was $1.219 billion, including $61
million related to Superfund sites.
Under provisions of the Superfund law, the Environmental Protection Agency
(EPA) has designated Chevron a potentially responsible party (PRP), or has
otherwise involved it, in the remediation of 238 hazardous waste sites. At
year-end 1994, the company's cumulative share of costs and settlements for
approximately 168 of these sites, for which payments or provisions have been
made in 1994 and prior years, was about $96 million, including a provision of
$16 million made during 1994. No single site is expected to result in a
material liability for the company at this time. For the remaining sites,
investigations are not yet at a stage where the company is able to quantify a
probable liability or determine a range of reasonably possible exposure. The
Superfund law provides for joint and several liability. Any future actions by
the EPA and other regulatory agencies to require Chevron to assume other
responsible parties' costs at designated hazardous waste sites are not
expected to have a material effect on the company's consolidated financial
position or liquidity.
Generally, provisions are recorded for work at identified sites where an
assessment or cleanup plan has been developed and for which costs can
reasonably be estimated. In 1994, the company recorded environmental
remediation provisions aggregating $223 million for its U.S. marketing sites
where no specific contamination had yet been identified, using estimates based
on its history of required remediation at other similar sites.
It is likely the company will continue to incur additional charges for
environmental remediation relating to past operations. These future costs are
indeterminable due to such factors as the unknown magnitude of possible
contamination, the unknown timing and extent of the corrective actions that
may be required, the determination of the company's liability in proportion to
other responsible parties and the extent to which such costs are recoverable
from third parties. While the amounts of future costs may be material to the
company's results of operations in the period in which they are recognized,
the company does not expect these costs to have a material effect on its
consolidated financial position or liquidity. Also, the company does not
believe its obligations to make such expenditures have had or will have any
significant impact on the company's competitive position relative to other
domestic or international petroleum or chemicals concerns. Although
environmental compliance costs are substantial, the company has no reason to
believe they vary significantly from similar costs incurred by other companies
engaged in similar businesses in similar areas. The company believes that such
costs ultimately are reflected in the petroleum and chemicals industries'
prices for products and services.
The petroleum industry is incurring major capital expenditures to meet
clean-air regulations, such as the 1990 amendments to the Clean Air Act in the
United States. For companies operating in California, where Chevron has a
significant presence, the California Air Resources Board has imposed even
stricter requirements. The company's worldwide capital expenditures related to
air quality are believed to have peaked at $495 million in 1994. For 1995,
total worldwide environ-
FS-3
mental capital expenditures are estimated at $622 million, of which $438
million are expected to be spent on air quality related measures. This is in
addition to the ongoing costs of complying with other environmental regulations
and the costs to remediate previously contaminated sites.
In addition to the reserves for environmental remediation discussed above, the
company maintains reserves for dismantlement, abandonment and restoration of
its worldwide oil and gas and coal properties at the end of their productive
lives. Most such costs are environmentally related. Provisions are recognized
on a unit-of-production basis as the properties are produced. The amount of
these reserves at year-end 1994 was $1.520 billion and is included in
accumulated depreciation, depletion and amortization in the company's
consolidated balance sheet.
For the company's other ongoing operating assets, such as refineries, no
provisions are made for exit or cleanup costs that may be required when such
assets reach the end of their useful lives unless a decision to sell or
otherwise abandon the facility has been made.
OTHER CONTINGENCIES. At year-end 1994 the company had $257 million of suspended
exploratory wells included in properties, plant and equipment. The wells are
suspended pending the drilling of additional wells to determine if commercially
producible quantities of oil and gas are present. These well costs will be
capitalized or expensed depending on the results of this future drilling
activity.
The company is the subject of various lawsuits and claims and other contingent
liabilities. These are discussed in the notes to the accompanying consolidated
financial statements. The company believes that the resolution of these matters
will not materially affect its financial position or liquidity.
The company utilizes various derivative instruments to manage its exposure to
price risk stemming from its integrated petroleum activities. Some of the
instruments may be settled by delivery of the underlying commodity, whereas
others can only be settled by cash. All these instruments are commonly used in
the global trade of petroleum products and are relatively straightforward,
involve little complexity and are substantially of a short-term duration. Most
of the activity in these instruments is intended to hedge a physical
transaction, hence gains and losses arising from these instruments offset, and
are recognized concurrently with, gains and losses from the underlying
commodities.
NEW ACCOUNTING STANDARDS. In the 1994 first quarter, the company adopted two
new accounting standards, Statement of Financial Accounting Standards (SFAS)
No. 112, "Employers Accounting for Postemployment Benefits" and SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities." The
adoption of these standards did not have a material effect on the company's
consolidated financial statements and had no effect on its liquidity. The 1994
consolidated financial statements also include the disclosures required by SFAS
119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments," dealing with instruments that can only be settled in
cash.
SPECIAL ITEMS. Net income is affected by transactions that are unrelated to, or
are not representative of, the company's ongoing operations for the periods
presented. These transactions, defined by management and designated "special
items," can obscure the underlying results of operations for a year as well as
affect comparability between years. The table below summarizes the gains
(losses), on an after-tax basis, from special items included in the company's
reported net income.
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Prior-Year Tax Adjustments $ 344 $(130) $ 72
Asset Dispositions 48 122 757
Asset Write-Offs and Revaluations - (71) (133)
Environmental Remediation Provisions (304) (90) (44)
Restructurings and Reorganizations (45) (554) (40)
LIFO Inventory Losses (10) (46) (26)
Other (11) (114) 65
- ------------------------------------------------------------------------------
Total Special Items $ 22 $(883) $651
==============================================================================
PRIOR-YEAR TAX ADJUSTMENTS are generally the result of the settlement of audit
issues with taxing authorities or the re-evaluation by the company of its tax
liabilities as a result of new developments. Also, adjustments are required
for the effect on deferred income taxes of changes in statutory tax rates. In
1994, prior-year tax adjustments increased earnings $344 million, including the
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net reversal of $301 million of tax and related interest reserves resulting
from the company's global settlement with the Internal Revenue Service for
issues relating to the years 1979 through 1987. Tax adjustments decreased
earnings $130 million in 1993, which included the effect of a one percent
increase in the U.S. corporate income tax rate, but increased earnings by $72
million in 1992.
ASSET DISPOSITIONS in 1994 consisted of the sale of the company's lead and zinc
prospect in Ireland, generating an after-tax profit of $48 million. This sale
completed the company's withdrawal from non-coal minerals activities. The Ortho
lawn and garden products business was the major asset sold in 1993, generating
a $130 million gain. In addition, oil and gas properties in the United States
and Indonesia, undeveloped coal properties in the United States and marketing
assets in Central America were sold in 1993 resulting in a net loss of $8
million. In 1992, assets sold included oil and gas properties in the United
States, United Kingdom, Canada and Sudan; a fertilizer business in the United
States; and a copper interest in Chile. In addition, the stock of a U.S. oil
and gas subsidiary was exchanged for 31,500,000 shares of Chevron stock, a
transaction valued at $1.1 billion. The combination of these and other smaller
sales resulted in after-tax gains of $757 million in 1992.
ASSET WRITE-OFFS AND REVALUATIONS in 1993 were comprised of certain U.S.
refinery assets, U.S. and Canadian production assets, and miscellaneous
corporate assets. Asset write-offs in 1992 consisted of a $110 million
write-down of the company's Beaufort Sea oil properties and a net $23 million
charge related to certain U.S. refining, marketing and chemical fertilizer
assets.
ENVIRONMENTAL REMEDIATION PROVISIONS pertain to estimated future costs for
environmental cleanup programs at certain of the company's U.S. service
stations, marketing terminals, refineries, chemical locations and oil and gas
properties; divested operations in which Chevron has liability for future
cleanup costs; and sites, commonly referred to as Superfund sites, for which
the company has been designated a PRP by the EPA. In addition to environmental
remediation and cleanup costs included in the 1994 and 1993 restructuring
charges discussed below, provisions for environmental remediation amounted to
$304 million in 1994, $90 million in 1993, and $44 million in 1992.
RESTRUCTURINGS AND REORGANIZATIONS charges in 1994 were a net $45 million
addition to the $543 million charge provided in 1993 to restructure the
company's U.S. refining and marketing business. The 1994 adjustment included $6
million applicable to the effect of the restructuring on the company's
chemicals operations. The adjustment also included the result of environmental
remediation actions agreed to with regulatory agencies, and retained by the
company, in connection with the terms of the sale of the Port Arthur refinery.
The 1993 charge was composed primarily of a write-down of the company's
Philadelphia and Port Arthur refinery facilities and related inventories to
their realizable values. In estimating the refineries' realizable values, the
company took into account certain environmental cleanup obligations. The
charges also included provisions for environmental site assessments and
employee severance.
The Philadelphia refinery was sold in August 1994 and the Port Arthur refinery
was sold in February 1995. At year-end 1994, the reserve balance of $715
million, before tax, was comprised of $491 million applicable to the loss on
the Port Arthur facilities and inventories and $224 million for retained future
Port Arthur environmental cleanup obligations. Additional Port Arthur
environmental reserves had been established prior to the decision to sell the
refinery.
In 1992, Chevron recorded a net charge of $40 million associated with
restructuring and work-force reductions in connection with the company's
enhanced early retirement program.
LIFO INVENTORY LIQUIDATION LOSSES result from the reduction of inventories in
certain inventory pools valued under the Last-In, First-Out (LIFO) accounting
method. LIFO losses decreased net income in 1994, 1993 and 1992 by $10 million,
$46 million and $26 million, respectively, as inventories were liquidated at
higher than then-current costs. These amounts include the company's equity
share of Caltex LIFO inventory effects. Chevron's consolidated petroleum
inventories were 99 million barrels at year-end 1994 and 1993 and 105 million
barrels at year-end 1992.
OTHER SPECIAL ITEMS in 1994 included charges for litigation and regulatory
settlements of $31 million, which were partially offset by a casualty insurance
recovery of $20 million. In 1993, net additions of $70 million to reserves for
various litigation and regulatory issues and a one-time cash bonus award to
employees totaling $60 million, were partially offset by a favorable inventory
adjustment of $16 million. In 1992, insurance recoveries and chemical products
licensing agreements of $76 million were partially offset by $11 million of net
additions to reserves for various litigation and regulatory issues.
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RESULTS OF OPERATIONS. Results for 1994 were depressed by lower average crude
oil and natural gas prices and lower sales margins on refined products. Crude
oil prices were especially low in the first quarter and U.S. refined products
margins were very weak in the second quarter. In addition to these industry
conditions, the company experienced unscheduled refinery downtime and other
refinery operating problems in its U.S. operations, particularly in the first
half of the year, that further reduced earnings. Chemicals operations, however,
were very strong, benefiting from improved industry fundamentals and the
restructuring and cost reduction programs undertaken in recent years.
In 1993, compared with 1992, strong worldwide refined product sales margins and
high U.S. natural gas prices mitigated the effects of lower crude oil prices.
Another contributing factor to the company's improved operating performance in
1993 was the large reduction in its operating and administrative costs. Also,
lower interest and exploration expenses helped earnings. Chemicals operations
were at depressed levels in both years, reflecting continued industry
overcapacity and weak worldwide economies.
SALES AND OTHER OPERATING REVENUES were $35.1 billion, down from $36.2 billion
in 1993 and $38.2 billion in 1992. Revenues declined from 1993 and 1992 levels
primarily due to lower prices for crude oil, natural gas and refined products
together with lower refined product sales volumes. These factors also accounted
for corresponding declines in PURCHASED CRUDE OIL AND PRODUCTS. The decline in
total revenues was partially mitigated by higher chemicals revenues and
gasoline excise tax collections.
OTHER INCOME in all years included net gains resulting from the disposition of
non-core assets, which caused other income to fluctuate from year to year.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES, adjusted for special items,
declined $150 million in 1994. Annual operating costs in 1994 were over $1
billion less than in 1991, the base measurement year set when the company
launched its cost reduction program in early 1992. Operating expenses in 1994
included unanticipated costs associated with unscheduled refinery shutdowns and
maintenance, as well as other refinery operating problems. Although a portion
of the cost reduction is a result of operations disposed of over the years, the
bulk of the decrease is due to a significant reduction to the company's ongoing
cost structure. Reported selling, general and administrative expenses in 1994
included the reversal of $319 million of accrued interest reserves on federal
income taxes payable resulting from the company's settlement with the IRS of
nine open tax years, 1979 through 1987.
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Reported Operating Expenses* $6,314 $6,267 $6,145
Reported Selling, General
and Administrative Expenses 963 1,530 1,761
- ------------------------------------------------------------------------------
Total Operational Costs 7,277 7,797 7,906
Eliminate Special Charges Before Tax (161) (531) (282)
- ------------------------------------------------------------------------------
Adjusted Ongoing Operational Costs $7,116 $7,266 $7,624
==============================================================================
* OPERATIONS ARE CHARGED AT MARKET RATES FOR CONSUMPTION OF THE COMPANY'S OWN
FUEL. THESE "COSTS" ARE ELIMINATED IN THE CONSOLIDATED FINANCIAL STATEMENTS.
FOR COST PERFORMANCE MEASUREMENT, SUCH COSTS ARE INCLUDED AND AMOUNTED TO
$1,027, $1,017 AND $1,251 IN 1994, 1993 AND 1992, RESPECTIVELY.
TAXES on income were $1.1 billion in 1994, $1.2 billion in 1993, and $1.3
billion in 1992, equating to effective income tax rates of 39.6 percent, 47.9
percent, and 36.2 percent for each of the three years, respectively. The lower
effective tax rate for 1994 is attributable to the effect of favorable
prior-year tax adjustments resulting from a global settlement with the Internal
Revenue Service for the years 1979 through 1987, which included the reversal of
excess interest reserves with little associated tax effect. The increase in the
1993 tax rate from 1992 levels is due primarily to unfavorable prior-year tax
adjustments, including an increase in deferred income taxes resulting from the
one percent increase in the U.S. corporate income tax rate. The 1992 rate
included the effect of a tax-free exchange, which resulted in a large book gain
with no associated tax cost.
CURRENCY TRANSACTIONS decreased net income $64 million in 1994 compared with
increases of $46 million in 1993 and $90 million in 1992. These amounts include
the company's share of affiliates' currency transactions. The loss on currency
transactions in 1994 resulted primarily from fluctuations in the value of the
Australian and Philippine currencies relative to the U.S. dollar. In 1993,
gains resulted from fluctuations in the currency of Nigeria. In 1992, gains
resulted from fluctuations in the currencies of the United Kingdom, Canada,
Australia and Nigeria.
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RESULTS BY MAJOR OPERATING AREAS
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Exploration and Production
United States $ 518 $ 566 $1,043
International 539 580 594
- ------------------------------------------------------------------------------
Total Exploration and Production 1,057 1,146 1,637
- ------------------------------------------------------------------------------
Refining, Marketing and Transportation
United States 40 (170) 297
International 239 252 111
- ------------------------------------------------------------------------------
Total Refining, Marketing and Transportation 279 82 408
- ------------------------------------------------------------------------------
Total Petroleum 1,336 1,228 2,045
Chemicals 206 143 89
Coal and Other Minerals 111 44 198
Corporate and Other 40 (150) (122)
- ------------------------------------------------------------------------------
Income Before Cumulative Effect
of Changes in Accounting Principles $1,693 $1,265 $2,210
Cumulative Effect of Changes
in Accounting Principles - - (641)
- ------------------------------------------------------------------------------
Net Income $1,693 $1,265 $1,569
==============================================================================
SPECIAL ITEMS BY MAJOR OPERATING AREAS
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Exploration and Production
United States $ (66) $(136) $413
International 20 (61) 14
- ------------------------------------------------------------------------------
Total Exploration and Production (46) (197) 427
- ------------------------------------------------------------------------------
Refining, Marketing and Transportation
United States (285) (725) (53)
International (10) 1 (3)
- ------------------------------------------------------------------------------
Total Refining, Marketing and Transportation (295) (724) (56)
- ------------------------------------------------------------------------------
Total Petroleum (341) (921) 371
Chemicals (9) 112 53
Coal and Other Minerals 48 - 159
Corporate and Other 324 (74) 68
- ------------------------------------------------------------------------------
Total Special Items Included in Net Income $ 22 $(883) $ 651
==============================================================================
U.S. EXPLORATION AND PRODUCTION earnings in 1994, excluding special items, were
down 17 percent from 1993 levels and down 7 percent from 1992 results.
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Earnings Excluding Special Items $584 $702 $ 630
- ------------------------------------------------------------------------------
Prior-Year Tax Adjustments - (40) 5
Asset Dispositions - (54) 419
Asset Write-Offs and Revaluations - (13) -
Environmental Remediation Provisions (51) (13) (2)
Restructurings and Reorganizations - (2) (35)
LIFO Inventory (Losses) Gains (4) 1 5
Other (11) (15) 21
- ------------------------------------------------------------------------------
Total Special Items (66) (136) 413
- ------------------------------------------------------------------------------
Reported Earnings $518 $566 $1,043
==============================================================================
Operationally, lower average crude oil and natural gas prices and lower crude
oil production levels in 1994 contributed to the earnings decline from 1993.
Crude prices were sharply lower in the last half of 1993, but recovered to the
point that in December 1994, the company's average realizations were $3.12 per
barrel higher than in December 1993. Overall, however, the company's average
crude oil realization for 1994 decreased $.72 per barrel to $13.86. Natural gas
prices fell throughout 1994, averaging $1.77 per thousand cubic feet for the
year, down $.22 from the 1993 average price. Natural gas accounts for almost
half of the company's U.S. oil and gas production volumes.
Cost cutting efforts and higher natural gas prices were the major factors in
1993's earnings improvement from 1992, offsetting lower crude oil prices and
lower production levels.
Net liquids production for 1994 averaged 369,000 barrels per day, down 6
percent from 394,000 in 1993 and down 15 percent from 432,000 barrels per day
in 1992. Net natural gas pro-
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duction in 1994 averaged about 2.1 billion cubic feet per day, about the same
level as 1993 but down from 2.3 billion cubic feet per day in 1992. The
production declines resulted from producing property sales, in connection with
the company's decision to concentrate its efforts on a core portfolio of about
400 producing properties, and from normal field declines.
INTERNATIONAL EXPLORATION AND PRODUCTION earnings in 1994, excluding special
items, were down 19 percent from 1993 levels and down 11 percent from 1992
results, due primarily to foreign currency effects. In 1994, foreign exchange
losses were $28 million, whereas in 1993 and 1992, foreign exchange gains
amounted to $57 million and $80 million, respectively.
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Earnings Excluding Special Items $519 $641 $580
- ------------------------------------------------------------------------------
Prior-Year Tax Adjustments 20 (63) (27)
Asset Dispositions - 29 166
Asset Write-Offs and Revaluations - (19) (110)
Restructurings and Reorganizations - (2) (9)
LIFO Inventory Losses - (1) (1)
Other - (5) (5)
- ------------------------------------------------------------------------------
Total Special Items 20 (61) 14
- ------------------------------------------------------------------------------
Reported Earnings $539 $580 $594
==============================================================================
Operationally, higher production volumes did not fully offset the effect of
lower average crude oil and natural gas prices in 1994. The company's average
international liquids prices, including equity in affiliates, declined to
$14.86 per barrel from $16.09 in 1993 and $17.93 in 1992. Average natural gas
prices were $1.84 per thousand cubic feet in 1994 compared with $2.08 and $2.07
in 1993 and 1992, respectively. In 1994, net liquids production, including
production from equity affiliates, increased 12 percent over 1993 to 624,000
barrels per day, and was up 22 percent from 1992 production levels. Net natural
gas production volumes also increased in 1994, up 16 percent from 1993 to 546
million cubic feet per day and up 18 percent from 1992 levels. Production of
crude oil and natural gas has been increasing steadily since the late 1980s,
reflecting the company's strategy of growing its international operations.
SELECTED OPERATING DATA
1994 1993 1992
- -------------------------------------------------------------------------------
U.S. EXPLORATION AND PRODUCTION
Net Crude Oil and Natural Gas
Liquids Production (MBPD) 369 394 432
Net Natural Gas Production (MMCFPD) 2,085 2,056 2,313
Natural Gas Liquids Sales (MBPD) 215 211 194
Revenues from Net Production
Crude Oil ($/bbl.) $13.86 $14.58 $16.50
Natural Gas ($/MCF) $ 1.77 $ 1.99 $ 1.70
INTERNATIONAL EXPLORATION AND PRODUCTION (1)
Net Crude Oil and Natural Gas
Liquids Production (MBPD) 624 556 512
Net Natural Gas Production (MMCFPD) 546 469 463
Natural Gas Liquids Sales (MBPD) 34 37 33
Revenues from Liftings
Liquids ($/bbl.) $14.86 $16.09 $17.93
Natural Gas ($/MCF) $ 1.84 $ 2.08 $ 2.07
U.S. REFINING AND MARKETING
Gasoline Sales (MBPD) 615 652 646
Other Refined Product Sales (MBPD) 699 771 824
Refinery Input (MBPD) 1,213 1,307 1,311
Average Refined Product Sales Price ($/bbl.) $24.37 $25.35 $25.96
INTERNATIONAL REFINING AND MARKETING (1)
Refined Product Sales (MBPD) 934 923 859
Refinery Input (MBPD) 623 598 543
CHEMICALS SALES AND OTHER OPERATING REVENUES (2)
United States $3,079 $2,694 $2,929
International 648 602 566
------------------------------
Worldwide $3,727 $3,296 $3,495
===============================================================================
(1) INCLUDES EQUITY IN AFFILIATES. REFINERY INPUT IN 1992 DOES NOT INCLUDE
SOUTH AFRICA WHERE LOCAL GOVERNMENT RESTRICTIONS PROHIBITED DISCLOSURE OF
REFINERY INPUT IN 1992 AND PRIOR YEARS.
(2) MILLIONS OF DOLLARS. INCLUDES SALES TO OTHER CHEVRON COMPANIES.
MBPD=thousand barrels per day; MMCFPD=million cubic feet per day;
bbl.=barrel; MCF=thousand cubic feet
FS-8
U.S. REFINING AND MARKETING earnings, excluding special items, declined 41
percent from 1993's strong results and were down 7 percent from 1992 levels.
Sales volumes in 1994 declined 8 percent from 1993 levels, largely due to the
sale of the company's Philadelphia refinery in August.
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Earnings Excluding Special Items $ 325 $ 555 $350
- ------------------------------------------------------------------------------
Prior-Year Tax Adjustments - (38) 7
Asset Dispositions - (1) -
Asset Write-Offs and Revaluations - (25) (31)
Environmental Remediation Provisions (249) (77) (42)
Restructurings and Reorganizations (39) (543) (1)
LIFO Inventory Gains (Losses) 3 (44) (22)
Other - 3 36
- ------------------------------------------------------------------------------
Total Special Items (285) (725) (53)
- ------------------------------------------------------------------------------
Reported Earnings $ 40 $(170) $297
==============================================================================
Sales margins were lower in 1994 compared with 1993. Refined products prices
were weak as ample supplies created a highly competitive market. The company
also experienced unscheduled refinery downtime and other refinery operating
problems early in 1994 that increased operating expenses and required more
expensive third-party product purchases to supply the company's marketing
system.
Compared with the previous year, the strong earnings in 1993 reflected lower
crude oil prices and lower operating costs, resulting in higher average sales
margins than in 1992. Total product sales volumes declined 3 percent from 1992
levels, although sales of higher-valued motor fuels increased about 1 percent.
INTERNATIONAL REFINING AND MARKETING earnings include international marine
operations and equity earnings of the company's Caltex Petroleum Corporation
affiliate. Excluding special items, 1994 earnings were about level with 1993,
but more than doubled from 1992.
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Earnings Excluding Special Items $249 $251 $114
- ------------------------------------------------------------------------------
Prior-Year Tax Adjustments - (4) 7
Asset Dispositions - 13 -
Asset Write-Offs and Revaluations - (1) -
Restructurings and Reorganizations - (1) (1)
LIFO Inventory Losses (10) (3) (9)
Other - (3) -
- ------------------------------------------------------------------------------
Total Special Items (10) 1 (3)
- ------------------------------------------------------------------------------
Reported Earnings $239 $252 $111
==============================================================================
Earnings in 1994 reflected lower results from the company's United Kingdom
operations and several of the Caltex major areas of operations, particularly
refining operations in Bahrain. United Kingdom operations were impacted by weak
sales margins and the effects of an explosion and fire at the cracking facility
that manufactures its gasoline. Shipping and trading earnings also declined. On
the other hand, Canadian results improved on higher sales volumes and stronger
markets. Results in 1992 reflected weak global economic conditions that held
down product prices, shrinking sales margins in all the company's areas of
operations.
Sales volumes for 1994 increased slightly over 1993 levels as a 5 percent
increase in marketing sales was mostly offset by a decline in the company's
trading sales volumes; however, 1994 volumes were up nearly 9 percent from 1992
due to continued demand growth in the Caltex areas of operations. Caltex
volumes, excluding transactions with Chevron, increased 4 percent from 1993 and
6 percent from 1992 to 1993, continuing its growth of the past several years.
Equity earnings of Caltex were $210 million, $227 million and $180 million for
1994, 1993, and 1992, respectively. Between 1994 and 1993, there was a
favorable swing of $69 million resulting from inventory adjustments and an
unfavorable impact of $43 million caused by foreign currency transactions. In
1994, Chevron's share of annual Caltex earnings benefited $17 million from
upward adjustments to the carrying value of its petroleum inventories to
reflect market values after a 1993 write-down of $52 million. Caltex foreign
currency transactions were losses of $27 million in 1994 but were gains of $16
million and $21 million in 1993 and 1992, respectively.
Total international refining and marketing foreign currency transaction losses
were $19 million in 1994, compared with gains of $2 million in 1993 and $13
million in 1992.
FS-9
CHEMICALS earnings, excluding special items, were up dramatically from 1993 and
1992 levels. The improving U.S. economy reduced industry overcapacity,
resulting in higher sales volumes at stronger prices, and reversing 5 years of
successively lower operating earnings caused by industry over-expansion just
prior to a downturn in the U.S. economy. Restructurings and cost reduction
programs undertaken in recent years positioned the company's chemicals
businesses to benefit from the improved industry conditions. Operating results
were strong in all the company's divisions - additives, aromatics and,
especially, olefins. Olefins results would have been even higher had a major
plant not been shut down for over a month because of damage caused by flooding
in southeast Texas in mid-October. The shutdown resulted in lost earnings and
higher operating and repair expenses.
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Earnings Excluding Special Items $215 $ 31 $36
- ------------------------------------------------------------------------------
Prior-Year Tax Adjustments - (5) (2)
Asset Dispositions - 130 13
Asset Write-Offs and Revaluations - - 8
Environmental Remediation Provisions (4) - -
Restructurings and Reorganizations (6) (5) (1)
LIFO Inventory Gains 1 1 1
Other - (9) 34
- ------------------------------------------------------------------------------
Total Special Items (9) 112 53
- ------------------------------------------------------------------------------
Reported Earnings $206 $143 $89
==============================================================================
COAL AND OTHER MINERALS earnings, excluding special items, increased 43 percent
from 1993 and 62 percent from 1992 results. Operationally, earnings improved as
coal sales margins were slightly higher. Sales tonnage, at 20.4 million tons,
was down slightly from the prior year, but up from 16.5 million tons in 1992.
Also, earnings benefited from the absence of 1993 and 1992 losses from non-coal
minerals activities.
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Earnings Excluding Special Items $ 63 $44 $ 39
- ------------------------------------------------------------------------------
Prior-Year Tax Adjustments - (2) -
Asset Dispositions 48 5 159
Other - (3) -
- ------------------------------------------------------------------------------
Total Special Items 48 - 159
- ------------------------------------------------------------------------------
Reported Earnings $111 $44 $198
==============================================================================
CORPORATE AND OTHER activities include interest expense, interest income on
cash and marketable securities, real estate and insurance operations, and
corporate center costs.
Excluding the effects of special items, corporate and other charges in 1994
were $284 million, compared with net charges of $76 million in 1993 and $190
million in 1992.
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
Earnings Excluding Special Items $(284) $ (76) $(190)
- ------------------------------------------------------------------------------
Prior-Year Tax Adjustments 324 22 82
Asset Write-offs and Revaluations - (13) -
Restructurings and Reorganizations - (1) 7
Other - (82) (21)
- ------------------------------------------------------------------------------
Total Special Items 324 (74) 68
- ------------------------------------------------------------------------------
Reported Earnings $ 40 $(150) $(122)
==============================================================================
In 1994, the company changed its method of distributing certain corporate
expenses to its business segments. As a result, corporate and other charges for
1994 included $190 million that, under the previous method, would have been
allocated to the business segments. This change had no net income effect.
Amounts that would have been allocated in 1994 to the company's major operating
areas under the prior method are as follows: U.S. Exploration and Production -
$34 million; U.S. Refining and Marketing - $32 million; International
Exploration and Production - $63 million; International Refining and Marketing
- - $48 million; Chemicals - $10 million; and Coal and Other Minerals - $3
million.
Higher interest costs in 1994 resulted from the combined effect of higher debt
levels and higher interest rates than in 1993. The decline in 1993 costs
relative to 1992 reflects an $84 million after-tax reduction in interest
expense, due to lower interest rates and lower debt levels.
LIQUIDITY AND CAPITAL RESOURCES. Cash, cash equivalents and marketable
securities decreased $710 million to $1.3 billion at year-end 1994. Cash
provided by operating activities decreased $1.3 billion in 1994 to $2.9
billion, compared with $4.2 billion in 1993 and $3.9 billion in 1992. The 1994
decrease reflects lower operational earnings, adjusted for non-cash charges,
and increased working capital requirements, including the payment of $675
million to the Internal Revenue Service for the settlement of substantially all
open tax issues for the nine
FS-10
years 1979 through 1987. Cash from operations, proceeds from asset sales, an
increase in overall debt levels and the draw-down of cash balances were used to
fund the company's capital expenditures and dividend payments to stockholders.
AT YEAR-END 1994, THE COMPANY CLASSIFIED $1.8 BILLION OF SHORT-TERM OBLIGATIONS
AS LONG-TERM DEBT. Settlement of these obligations, consisting of commercial
paper, is not expected to require the use of working capital in 1995 because
the company has the intent and the ability, as evidenced by revolving credit
arrangements, to refinance them on a long-term basis. The company's practice
has been to continually refinance its commercial paper, maintaining levels it
believes to be appropriate.
ON DECEMBER 31, 1994, CHEVRON HAD $4.4 BILLION IN COMMITTED CREDIT FACILITIES
WITH VARIOUS MAJOR BANKS. These facilities support commercial paper borrowing
and can also be used for general credit requirements. No borrowings were
outstanding under these facilities during the year or at year-end 1994. In
addition, Chevron and one of its subsidiaries each have existing "shelf"
registrations on file with the Securities and Exchange Commission that together
would permit registered offerings of up to approximately $700 million of debt
securities.
THE COMPANY'S DEBT AND CAPITAL LEASE OBLIGATIONS TOTALED $8.142 BILLION AT
DECEMBER 31, 1994, up $604 million from $7.538 billion at year-end 1993. The
increase is primarily from $466 million of additional net short-term
borrowings, largely the issuance of commercial paper, the issuance of $350
million of 7.45 percent notes due in the year 2004 and $65 million in capital
lease obligations associated with the delivery of a new vessel. These increases
were partially offset by the first quarter repayment of $200 million of 7.875
percent public debt originally due March 1, 1997. The company also retired $40
million of debt related to the Employee Stock Ownership Plan in January 1994.
THE COMPANY'S FUTURE DEBT LEVEL IS PRIMARILY DEPENDENT ON ITS CAPITAL SPENDING
PROGRAM AND ITS BUSINESS OUTLOOK. While the company does not currently expect
its debt level to increase significantly during 1995, it believes it has
substantial borrowing capacity to meet unanticipated cash requirements.
FINANCIAL RATIOS
1994 1993 1992
- ------------------------------------------------------------------
Current Ratio 0.8 0.8 0.9
Interest Coverage Ratio 7.6 7.4 8.2
Total Debt/Total Debt Plus Equity 35.8% 35.0% 36.4%
==================================================================
The CURRENT RATIO is the ratio of current assets to current liabilities at
year-end. Two items affect the current ratio negatively, which in the company's
opinion, do not affect its liquidity. Included in current assets in all years
are inventories valued on a LIFO basis, which at year-end 1994 were lower than
current costs by $684 million. Also the company's practice of continually
refinancing its commercial paper, $3.2 billion classified as short-term at
year-end 1994, results in a large portion of its short-term debt being
outstanding indefinitely. Chevron's interest coverage ratio increased in 1994
due to higher income before tax. The INTEREST COVERAGE RATIO is defined as
income before income tax expense, plus interest and debt expense and
amortization of capitalized interest, divided by before-tax interest costs. The
company's DEBT RATIO (total debt to total debt plus equity) increased slightly,
as total debt increased more than equity did year-to-year.
The company's senior debt is rated AA by Standard & Poor's Corporation and Aa2
by Moody's Investors Service. Chevron's U.S. commercial paper is rated A-1$PL
by Standard & Poor's and Prime-1 by Moody's, and Chevron's Canadian commercial
paper is rated R-1 (middle) by Dominion Bond Rating Service. All these ratings
denote high-quality, investment-grade securities.
CAPITAL AND EXPLORATORY EXPENDITURES
WORLDWIDE CAPITAL AND EXPLORATORY EXPENDITURES FOR 1994, INCLUDING THE
COMPANY'S EQUITY SHARE OF AFFILIATES' EXPENDITURES, TOTALED $4.8 BILLION.
Expenditures for exploration and production accounted for 57 percent of total
outlays in 1994, 53 percent in 1993 and 51 percent in 1992. International
exploration and production spending increased to 71 percent of worldwide
exploration and production expenditures in 1994, up from 68 percent in 1993 and
65 percent in 1992, reflecting the company's increased focus on international
exploration and production activities.
FS-11
THE COMPANY PROJECTS 1995 CAPITAL AND EXPLORATORY EXPENDITURES AT APPROXIMATELY
$5.1 BILLION, including Chevron's share of spending by affiliates. Excluding
affiliates, spending will be essentially flat at $3.9 billion. The 1995 program
provides $2.7 billion in exploration and production investments, of which about
70 percent are for international projects.
The company is participating in several significant oil and gas development
projects. These include the development of the Hibernia field off the coast of
Newfoundland; the Tengiz project in Kazakhstan; steam- and water-flood projects
in Indonesia; expansion of the North West Shelf liquefied natural gas project
in Australia; continued development of the Britannia natural gas field in the
North Sea; expanded production projects in Angola; field development and
expanded exploration in Congo; new field development in Papua New Guinea; and
the Norphlet Trend natural gas development project in the Gulf of Mexico.
Refining, marketing and transportation expenditures are estimated at about $1.9
billion, with about $900 million of that planned for the U.S., including
upgrading U.S. refineries to produce reformulated gasolines needed to comply
with the Clean Air Act and California Air Resources Board regulations. Most of
the balance will be focused on high growth Asia Pacific Rim countries where the
company's Caltex affiliate has several major refinery projects under way to
meet rising demand, including continuing the construction of a new refinery in
Thailand and capacity expansion projects in Japan and Korea.
Projected spending also includes funds for the expansion of the linear
low-density polyethylene manufacturing plant at the Cedar Bayou, Texas,
chemicals facility.
CAPITAL AND EXPLORATORY EXPENDITURES
1994 1993 1992
----------------------------- ----------------------------- -----------------------------
INTER- INTER- INTER-
MILLIONS OF DOLLARS U.S. NATIONAL TOTAL U.S. NATIONAL TOTAL U.S. NATIONAL TOTAL
- ---------------------------------------------------------------------------------------------------------------------------------
Exploration and Production $ 807 $1,931 $2,738 $ 763 $1,599 $2,362 $ 792 $1,458 $2,250
Refining, Marketing and Transportation 885 890 1,775 949 748 1,697 962 749 1,711
Chemicals 109 29 138 199 34 233 224 37 261
Coal and Other Minerals 39 15 54 47 10 57 65 20 85
All Other 114 - 114 91 - 91 116 - 116
- ---------------------------------------------------------------------------------------------------------------------------------
Total $1,954 $2,865 $4,819 $2,049 $2,391 $4,440 $2,159 $2,264 $4,423
- ---------------------------------------------------------------------------------------------------------------------------------
Total Excluding Equity in Affiliates $1,927 $2,046 $3,973 $2,029 $1,710 $3,739 $2,136 $1,666 $3,802
=================================================================================================================================
QUARTERLY RESULTS AND STOCK MARKET DATA
Unaudited
1994 1993
-------------------------------------- ----------------------------------------
MILLIONS OF DOLLARS, EXCEPT PER-SHARE AMOUNTS 4TH Q 3RD Q 2ND Q 1ST Q 4TH Q 3RD Q 2ND Q 1ST Q
- ---------------------------------------------------------------------------------------------------------------------------------
REVENUES
Sales and other operating revenues $8,927 $9,396 $8,702 $8,105 $8,778 $9,097 $9,413 $8,903
Equity in net income of affiliated
companies and other income 330 113 122 159 135 136 441 179
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 9,257 9,509 8,824 8,264 8,913 9,233 9,854 9,082
- ---------------------------------------------------------------------------------------------------------------------------------
COSTS AND OTHER DEDUCTIONS
Purchased crude oil and products,
operating and other expenses 6,225 6,695 6,201 5,594 6,467 6,401 7,748 6,385
Depreciation, depletion and amortization 598 626 615 592 652 615 596 589
Taxes other than on income 1,406 1,405 1,403 1,345 1,303 1,219 1,227 1,137
Interest and debt expense 97 93 83 73 73 76 81 87
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND OTHER DEDUCTIONS 8,326 8,819 8,302 7,604 8,495 8,311 9,652 8,198
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 931 690 522 660 418 922 202 884
INCOME TAX EXPENSE 308 265 265 272 124 502 152 383
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCOME (1) $ 623 $ 425 $ 257 $ 388 $ 294 $ 420 $ 50 $ 501
=================================================================================================================================
PER SHARE OF COMMON STOCK (2)
- -----------------------------
NET INCOME PER SHARE $0.96 $0.65 $0.39 $0.60 $0.45 $0.64 $0.08 $0.77
=================================================================================================================================
DIVIDENDS PAID PER SHARE $0.4625 $0.4625 $0.4625 $0.4625 $0.4375 $0.4375 $0.4375 $0.4375
=================================================================================================================================
COMMON STOCK PRICE RANGE - HIGH $46 1/2 $45 3/8 $49 3/16 $47 5/16 $49 3/8 $48 15/16 $45 7/16 $41 3/4
- LOW $41 $39 7/8 $41 1/4 $41 3/16 $41 3/4 $40 5/8 $39 3/4 $33 11/16
=================================================================================================================================
(1) SPECIAL CREDITS (CHARGES)
INCLUDED IN NET INCOME. $ 45 $ 18 $ (5) $ (36) $ (221) $ (145) $ (515) $ (2)
(2) PER-SHARE AMOUNTS FOR 1993 AND FIRST QUARTER 1994 HAVE BEEN RESTATED TO REFLECT A TWO-FOR-ONE STOCK SPLIT IN MAY 1994.
- ---------------------------------------------------------------------------------------------------------------------------------
THE COMPANY'S COMMON STOCK IS LISTED ON THE NEW YORK STOCK EXCHANGE (TRADING SYMBOL: CHV), AS WELL AS THE CHICAGO; PACIFIC;
LONDON; AND ZURICH, BASEL AND GENEVA, SWITZERLAND, STOCK EXCHANGES. IT ALSO IS TRADED ON THE BOSTON, CINCINNATI, DETROIT AND
PHILADELPHIA STOCK EXCHANGES. AS OF FEBRUARY 28, 1995, STOCKHOLDERS OF RECORD NUMBERED APPROXIMATELY 141,000.
THERE ARE NO RESTRICTIONS ON THE COMPANY'S ABILITY TO PAY DIVIDENDS. CHEVRON HAS MADE DIVIDEND PAYMENTS TO STOCKHOLDERS FOR
83 CONSECUTIVE YEARS.
FS-12
REPORT OF MANAGEMENT
TO THE STOCKHOLDERS OF CHEVRON CORPORATION
Management of Chevron is responsible for preparing the accompanying financial
statements and for assuring their integrity and objectivity. The statements
were prepared in accordance with generally accepted accounting principles and
fairly represent the transactions and financial position of the company. The
financial statements include amounts that are based on management's best
estimates and judgments.
The company's statements have been audited by Price Waterhouse LLP, independent
accountants, selected by the Audit Committee and approved by the stockholders.
Management has made available to Price Waterhouse LLP all the company's
financial records and related data, as well as the minutes of stockholders' and
directors' meetings.
Management of the company has established and maintains a system of internal
accounting controls that is designed to provide reasonable assurance that
assets are safeguarded, transactions are properly recorded and executed in
accordance with management's authorization, and the books and records
accurately reflect the disposition of assets. The system of internal controls
includes appropriate division of responsibility. The company maintains an
internal audit department that conducts an extensive program of internal audits
and independently assesses the effectiveness of the internal controls.
The Audit Committee is composed of directors who are not officers or employees
of the company. It meets regularly with members of management, the internal
auditors and the independent accountants to discuss the adequacy of the
company's internal controls, financial statements and the nature, extent and
results of the audit effort. Both the internal auditors and the independent
accountants have free and direct access to the Audit Committee without the
presence of management.
/s/ K.T. Derr /s/ M.R. Klitten /s/ D.G. Henderson
Kenneth T. Derr Martin R. Klitten Donald G. Henderson
Chairman of the Board Vice President, Finance Vice President
and Chief Executive Officer and Chief Financial Officer and Comptroller
February 28, 1995
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE STOCKHOLDERS AND THE BOARD OF DIRECTORS OF CHEVRON CORPORATION
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Chevron Corporation
and its subsidiaries at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, effective
January 1, 1992, the company changed its methods of accounting for
postretirement benefits other than pensions and for income taxes.
/s/ Price Waterhouse LLP
San Francisco, California
February 28, 1995
FS-13
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31
MILLIONS OF DOLLARS, ----------------------------------
EXCEPT PER-SHARE AMOUNTS 1994 1993 1992
- ------------------------------------------------------------------------------
REVENUES
Sales and other operating revenues (1) $35,130 $36,191 $38,212
Equity in net income
of affiliated companies 440 440 406
Other income 284 451 1,059
- ------------------------------------------------------------------------------
TOTAL REVENUES 35,854 37,082 39,677
- ------------------------------------------------------------------------------
COSTS AND OTHER DEDUCTIONS
Purchased crude oil and products 16,990 18,007 19,872
Operating expenses 6,314 6,267 6,145
Provision for U.S. refining
and marketing restructuring 69 837 -
Exploration expenses 379 360 507
Selling, general and administrative expenses 963 1,530 1,761
Depreciation, depletion and amortization 2,431 2,452 2,594
Taxes other than on income (1) 5,559 4,886 4,899
Interest and debt expense 346 317 436
- ------------------------------------------------------------------------------
TOTAL COSTS AND OTHER DEDUCTIONS 33,051 34,656 36,214
- ------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE
AND CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES 2,803 2,426 3,463
INCOME TAX EXPENSE 1,110 1,161 1,253
==============================================================================
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $ 1,693 $ 1,265 $ 2,210
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES - - (641)
==============================================================================
NET INCOME $ 1,693 $ 1,265 $ 1,569
==============================================================================
PER SHARE OF COMMON STOCK: (2)
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $2.60 $1.94 $3.26
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES - - (.95)
----------------------------------
NET INCOME PER SHARE OF COMMON STOCK $2.60 $1.94 $2.31
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 651,672,238 650,957,752 677,954,828
==============================================================================
(1) INCLUDES CONSUMER EXCISE TAXES. $4,790 $4,068 $3,964
(2) SHARES AND PER-SHARE AMOUNTS REFLECT A TWO-FOR-ONE STOCK SPLIT IN MAY 1994.
See accompanying notes to consolidated financial statements.
FS-14
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31
--------------------------
MILLIONS OF DOLLARS 1994 1993
- ------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 413 $ 1,644
Marketable securities 893 372
Accounts and notes receivable
(less allowance: 1994 - $62; 1993 - $66) 3,923 3,808
Inventories:
Crude oil and petroleum products 1,036 1,108
Chemicals 391 423
Materials and supplies 263 252
Other merchandise 20 18
--------------------------
1,710 1,801
Prepaid expenses and other current assets 652 1,057
- ------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 7,591 8,682
Long-term receivables 138 94
Investments and advances 3,991 3,623
Properties, plant and equipment, at cost 46,810 44,807
Less: accumulated depreciation,
depletion and amortization 24,637 22,942
--------------------------
22,173 21,865
Deferred charges and other assets 514 472
- ------------------------------------------------------------------------------
TOTAL ASSETS $34,407 $34,736
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $ 4,014 $ 3,456
Accounts payable 2,990 3,325
Accrued liabilities 1,274 2,538
Federal and other taxes on income 624 782
Other taxes payable 490 505
- ------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 9,392 10,606
Long-term debt and capital lease obligations 4,128 4,082
Deferred credits and other non-current obligations 2,043 1,677
Non-current deferred income taxes 2,674 2,916
Reserves for employee benefit plans 1,574 1,458
- ------------------------------------------------------------------------------
TOTAL LIABILITIES 19,811 20,739
- ------------------------------------------------------------------------------
Preferred stock (authorized 100,000,000 shares,
$1.00 par value, none issued) - -
Common stock (authorized 1,000,000,000 shares,
$1.50 par value, 712,487,068 shares issued) * 1,069 1,069
Capital in excess of par value 1,858 1,855
Deferred compensation - Employee
Stock Ownership Plan (ESOP) (900) (920)
Currency translation adjustment and other 175 108
Retained earnings 14,457 13,955
Treasury stock, at cost (1994 - 60,736,435 shares;
1993 - 61,008,858 shares) * (2,063) (2,070)
- ------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 14,596 13,997
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $34,407 $34,736
==============================================================================
* SHARES AND PAR VALUE AMOUNTS REFLECT A TWO-FOR-ONE STOCK SPLIT IN MAY 1994.
See accompanying notes to consolidated financial statements.
FS-15
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31
------------------------------
MILLIONS OF DOLLARS 1994 1993 1992
- ------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 1,693 $ 1,265 $ 1,569
Adjustments
Depreciation, depletion and amortization 2,431 2,452 2,594
Dry hole expense related
to prior years' expenditures 53 29 57
Distributions less than equity
in affiliates' income (55) (173) (144)
Net before-tax (gains) losses on
asset retirements and sales (83) 373 (568)
Net currency translation losses (gains) 40 (27) (66)
Deferred income tax provision 110 (160) (176)
Cumulative effect of changes
in accounting principles - - 641
Net (increase) decrease in operating
working capital (1) (1,773) 463 82
Other (2) 480 (1) (75)
- ------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES (3) 2,896 4,221 3,914
- ------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (3,405) (3,323) (3,352)
Proceeds from asset sales 731 908 1,043
Net (purchases) sales of
marketable securities (4) (545) 30 45
- ------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (3,219) (2,385) (2,264)
- ------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net borrowings of short-term obligations 466 293 1,333
Proceeds from issuance of long-term debt 436 199 23
Repayments of long-term debt
and other financing obligations (588) (854) (1,260)
Cash dividends paid (1,206) (1,139) (1,115)
Purchases of treasury shares (5) (4) (382)
- ------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES (897) (1,505) (1,401)
- ------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS (11) 21 3
- ------------------------------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,231) 352 252
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,644 1,292 1,040
- ------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT YEAR-END $ 413 $ 1,644 $ 1,292
==============================================================================
(1) THE "NET (INCREASE) DECREASE IN OPERATING WORKING CAPITAL" IS COMPOSED OF
THE FOLLOWING:
(INCREASE) DECREASE IN ACCOUNTS
AND NOTES RECEIVABLE $ (44) $ 187 $ 97
(INCREASE) DECREASE IN INVENTORIES (57) 288 292
DECREASE (INCREASE) IN PREPAID EXPENSES
AND OTHER CURRENT ASSETS 4 (52) 85
(DECREASE) INCREASE IN ACCOUNTS PAYABLE
AND ACCRUED LIABILITIES (1,510) 214 (567)
(DECREASE) INCREASE IN INCOME AND
OTHER TAXES PAYABLE (166) (174) 175
- ------------------------------------------------------------------------------
NET (INCREASE) DECREASE IN
OPERATING WORKING CAPITAL $(1,773) $ 463 $ 82
==============================================================================
(2) IN 1994, "OTHER" OPERATING ACTIVITIES
WERE COMPRISED PRIMARILY OF INCREASES IN
NON-CURRENT OBLIGATIONS WHICH INCLUDED,
IN PART, NON-CASH PROVISIONS FOR
ENVIRONMENTAL REMEDIATION.
(3) "NET CASH PROVIDED BY OPERATING ACTIVITIES"
INCLUDES THE FOLLOWING CASH PAYMENTS FOR
INTEREST AND INCOME TAXES:
INTEREST PAID ON DEBT (NET OF
CAPITALIZED INTEREST) $ 310 $ 309 $ 392
INCOME TAXES PAID $ 1,147 $ 1,505 $ 1,236
==============================================================================
(4) "NET (PURCHASES) SALES OF MARKETABLE
SECURITIES" CONSISTS OF THE FOLLOWING
GROSS AMOUNTS:
MARKETABLE SECURITIES PURCHASED $(1,943) $(1,855) $(2,633)
MARKETABLE SECURITIES SOLD 1,398 1,885 2,678
- ------------------------------------------------------------------------------
NET (PURCHASES) SALES OF MARKETABLE SECURITIES $ (545) $ 30 $ 45
==============================================================================
See accompanying notes to consolidated financial statements.
FS-16
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY*
NUMBER OF SHARES MILLIONS OF DOLLARS
------------------------ --------------------------------------------------------------------------
CURRENCY
COMMON COMMON CAPITAL IN DEFERRED TRANSLATION
STOCK STOCK IN COMMON EXCESS OF COMPENSA- ADJUSTMENT RETAINED TREASURY
ISSUED TREASURY STOCK PAR VALUE TION-ESOP AND OTHER EARNINGS STOCK
------------------------ -------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1991 712,487,068 (19,042,538) $1,069 $1,839 $(964) $ 67 $13,349 $ (621)
Net income - - - - - - 1,569 -
Cash dividends -
$1.65 per share - - - - - - (1,115) -
Tax benefit from
dividends paid on
unallocated ESOP shares - - - - - - 11 -
Foreign currency
translation adjustment - - - - - (10) - -
Pension Plan
minimum liability - - - - - (1) - -
ESOP expense
accrual adjustment - - - - 10 - - -
Treasury shares acquired
in exchange transaction - (31,500,000) - - - - - (1,100)
Purchase of treasury shares - (11,868,922) - - - - - (382)
Reissuance of treasury shares - 271,970 - 1 - - - 6
------------------------ -------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1992 712,487,068 (62,139,490) $1,069 $1,840 $(954) $56 $13,814 $(2,097)
Net income - - - - - - 1,265 -
Cash dividends -
$1.75 per share - - - - - - (1,139) -
Tax benefit from
dividends paid on
unallocated ESOP shares - - - - - - 15 -
Foreign currency
translation adjustment - - - - - 52 - -
ESOP expense
accrual adjustment - - - - 4 - - -
Reduction of ESOP debt - - - - 30 - - -
Purchase of treasury shares - (92,506) - - - - - (4)
Reissuance of treasury shares - 1,223,138 - 15 - - - 31
------------------------ -------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1993 712,487,068 (61,008,858) $1,069 $1,855 $(920) $108 $13,955 $(2,070)
Net income - - - - - - 1,693 -
Cash dividends -
$1.85 per share - - - - - - (1,206) -
Tax benefit from
dividends paid on
unallocated ESOP shares - - - - - - 15 -
Market value adjustments
on investments - - - - - 11 - -
Foreign currency
translation adjustment - - - - - 72 - -
Pension plan
minimum liability - - - - - (16) - -
ESOP expense
accrual adjustment - - - - (20) - - -
Reduction of ESOP debt - - - - 40 - - -
Purchase of treasury shares - (108,964) - - - - - (5)
Reissuance of treasury shares - 381,387 - 3 - - - 12
------------------------ -------------------------------------------------------------------------
BALANCE AT
DECEMBER 31, 1994 712,487,068 (60,736,435) $1,069 $1,858 $(900) $175 $14,457 $(2,063)
======================================================= =========================================================================
* SHARES AND PER-SHARE AMOUNTS REFLECT A TWO-FOR-ONE STOCK SPLIT IN MAY 1994.
See accompanying notes to consolidated financial statements.
FS-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Millions of dollars
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Chevron Corporation and its
consolidated subsidiaries (the company) employ accounting policies that are in
accordance with generally accepted accounting principles in the United States.
SUBSIDIARY AND AFFILIATED COMPANIES. The consolidated financial statements
include the accounts of subsidiary companies more than 50 percent owned.
Investments in and advances to affiliates in which the company has a
substantial ownership interest of approximately 20 to 50 percent, or for which
the company participates in policy decisions, are accounted for by the equity
method. Under this accounting, remaining unamortized cost is increased or
decreased by the company's share of earnings or losses after dividends.
OIL AND GAS ACCOUNTING. The successful efforts method of accounting is used for
oil and gas exploration and production activities.
DERIVATIVES. Gains and losses on hedges of existing assets or liabilities are
included in the carrying amounts of those assets or liabilities and are
ultimately recognized in income as part of those carrying amounts. Gains and
losses related to qualifying hedges of firm commitments or anticipated
transactions also are deferred and are recognized in income or as adjustments
of carrying amounts when the hedged transaction occurs. Gains and losses on
derivatives contracts that do not qualify as hedges are recognized currently in
"Other income."
SHORT-TERM INVESTMENTS. All short-term investments are classified as
available-for-sale, and are in highly liquid debt securities. Those investments
that are part of the company's cash management portfolio with original
maturities of three months or less are reported as cash equivalents. The
balance of the short-term investments is reported as marketable securities.
INVENTORIES. Crude oil, petroleum products, chemicals and other merchandise are
stated at cost, using a Last-In, First-Out (LIFO) method. In the aggregate,
these costs are below market. Materials and supplies generally are stated at
average cost.
PROPERTIES, PLANT AND EQUIPMENT. All costs for development wells, related plant
and equipment (including carbon dioxide and certain other injected materials
used in enhanced recovery projects), and mineral interests in oil and gas
properties are capitalized. Costs of exploratory wells are capitalized pending
determination of whether the wells found proved reserves. Costs of wells that
are assigned proved reserves remain capitalized. All other exploratory wells
and costs are expensed.
Proved oil and gas properties are regularly assessed for possible impairment on
an aggregate worldwide portfolio basis, applying the informal "ceiling test" of
the Securities and Exchange Commission. Under this method, the possibility of
an impairment may exist if the aggregate net book carrying value of these
properties, net of applicable deferred income taxes, exceeds the aggregate
undiscounted future cash flows, after tax, from the properties, as calculated
in accordance with accounting rules for supplemental information on oil and gas
producing activities. In addition, high-cost, long-lead-time oil and gas
projects are individually assessed prior to production start-up by comparing
the recorded investment in the project with its fair market or economic value,
as appropriate. Economic values are generally based on management's
expectations of discounted future after-tax cash flows from the project at the
time of assessment.
Depreciation and depletion (including provisions for future abandonment and
restoration costs) of all capitalized costs of proved oil and gas producing
properties, except mineral interests, are expensed using the unit-of-production
method by individual fields as the proved developed reserves are produced.
Depletion expenses for capitalized costs of proved mineral interests are
recognized using the unit-of-production method by individual fields as the
related proved reserves are produced. Periodic valuation provisions for
impairment of capitalized costs of unproved mineral interests are expensed.
Depreciation and depletion expenses for coal are determined using the
unit-of-production method as the proved reserves are produced. The capitalized
costs of all other plant and equipment are depreciated or amortized over
estimated useful lives. In general, the declining-balance method is used to
depreciate plant and equipment in the United States; the straight-line method
generally is used to depreciate international plant and equipment and to
amortize all capitalized leased assets.
Gains or losses are not recognized for normal retirements of properties, plant
and equipment subject to composite group amortization or depreciation. Gains or
losses from abnormal retirements or sales are included in income.
Expenditures for maintenance, repairs and minor renewals to maintain facilities
in operating condition are expensed. Major replacements and renewals are
capitalized.
ENVIRONMENTAL EXPENDITURES. Environmental expenditures that relate to current
ongoing operations or to conditions caused by past operations are expensed.
Expenditures that create future benefits or contribute to future revenue
generation are capitalized.
Liabilities related to future remediation costs are recorded when environmental
assessments and/or cleanups are probable, and the costs can be reasonably
estimated. Other than for assessments, the timing and magnitude of these
accruals is generally based on the company's commitment to a formal plan of
action, such as an approved remediation plan or the sale or disposal of an
asset. For the company's domestic marketing facilities, the accrual is based on
the probability that a future remediation commitment will be required. For oil
and gas and coal producing properties, a provision is made through depreciation
expense for anticipated abandonment and restoration costs at the end of the
property's useful life.
For Superfund sites, the company records a liability for its share of costs
when it has been named as a Potentially Responsible Party (PRP) and when an
assessment or cleanup plan has been developed. This liability includes the
company's own portion of the costs and also the company's portion of amounts
for
FS-18
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
other PRPs when it is probable that they will not be able to pay their share of
the cleanup obligation.
The company records the gross amount of its liability based on its best
estimate of future costs in current dollars and using currently available
technology and applying current regulations as well as the company's own
internal environmental policies. Future amounts are not discounted. Probable
recoveries or reimbursements are recorded as an asset.
CURRENCY TRANSLATION. The U.S. dollar is the functional currency for the
company's consolidated operations as well as for substantially all operations
of its equity method companies. For those operations, all gains or losses from
currency transactions are included in income currently. The cumulative
translation effects for the few equity affiliates using functional currencies
other than the U.S. dollar are included in the currency translation adjustment
in stockholders' equity.
TAXES. Income taxes are accrued for retained earnings of international
subsidiaries and corporate joint ventures intended to be remitted. Income taxes
are not accrued for unremitted earnings of international operations that have
been, or are intended to be, reinvested indefinitely.
NOTE 2. ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NO. 106,
"EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS" (SFAS
106) AND NO. 109, "ACCOUNTING FOR INCOME TAXES" (SFAS 109) Effective January 1,
1992, the company adopted SFAS 106 and SFAS 109, issued by the Financial
Accounting Standards Board. The effects of these statements on 1992 net income
included a charge of $641, or $.95 per share, attributable to the cumulative
effect of adoption, including the company's share of equity affiliates. This
net charge was composed of $833, after related tax benefits of $423, for the
recognition of liabilities for retiree benefits (primarily health and life
insurance), partially offset by a credit of $192 for deferred income tax
benefits and other changes stipulated by the new income tax accounting rules.
NOTE 3. SPECIAL ITEMS AND OTHER FINANCIAL INFORMATION Net income is affected by
transactions that are unrelated to or are not representative of the company's
ongoing operations for the periods presented. These transactions, defined by
management and designated "special items," can obscure the underlying results
of operations for a year as well as affect comparability of results between
years.
Listed below are categories of special items and their net increase (decrease)
to net income, after related tax effects:
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
Asset dispositions, net
Lead and zinc property in Ireland $ 48 $ - $ -
Ortho lawn and garden products - 130 -
Oil and gas properties - (25) 209
Stock exchange with Pennzoil Company - - 376
Copper interest in Chile - - 159
Other - 17 13
------------------------------
48 122 757
- ------------------------------------------------------------------------------
Asset write-offs and revaluations
Oil and gas properties - (31) (110)
Refining and marketing assets - (24) (31)
Other - (16) 8
------------------------------
- (71) (133)
- ------------------------------------------------------------------------------
Prior-year tax adjustments 344 (130) 72
- ------------------------------------------------------------------------------
Environmental remediation provisions (304) (90) (44)
- ------------------------------------------------------------------------------
Restructurings and reorganizations
Work-force reductions, net - (11) (40)
U.S. refining and marketing (39) (543) -
Chemicals (6) - -
------------------------------
(45) (554) (40)
- ------------------------------------------------------------------------------
LIFO inventory losses (10) (46) (26)
- ------------------------------------------------------------------------------
Other, net
Litigation and regulatory issues (31) (70) (11)
One-time employee bonus - (60) -
Chemicals products license agreements - - 32
Insurance gains and other adjustments 20 16 44
------------------------------
(11) (114) 65
- ------------------------------------------------------------------------------
Total special items, after tax $ 22 $(883) $651
==============================================================================
The 1994 U.S. refining and marketing restructuring charge of $39 and the
chemicals charge of $6 were net adjustments made to the 1993 charge of $543.
The restructuring reserve was primarily composed of writedowns of two
refineries and their related inventories to estimated realizable values. The
estimated realizable value of the refineries took into account certain
environmental cleanup obligations. Also included in the reserve were amounts
for environmental site assessments and employee severance. The refineries are
located in Philadelphia, Pennsylvania, and Port Arthur, Texas.
The Philadelphia refinery was sold in August 1994 and the Port Arthur refinery
was sold in February 1995. The reserve was reduced by the amount of proceeds
received from the sale of the Philadelphia refinery and adjustments were made
to reflect the terms of the sales. These included adjustments to the realizable
values of the assets, primarily inventories, and the recognition of certain
environmental remediation obligations retained by the company. These
adjustments resulted in a $45 net increase to the reserve. At year-end 1994,
the reserve balance, before related tax effects, was composed of $491 for loss
on the sale of the Port Arthur refinery and related inventories and $224 for
Port Arthur environmental cleanup obligations.
The company does not expect the environmental cleanup expenditures, most of
which will be made over an approximate
FS-19
NOTE 3. SPECIAL ITEMS AND OTHER FINANCIAL INFORMATION - Continued
ten-year period, to have any material effect on its liquidity. The costs will
be funded through cash from future operations.
Other financial information is as follows:
YEAR ENDED DECEMBER 31
-------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
Total financing interest and debt costs $419 $371 $478
Less: capitalized interest 73 54 42
- ------------------------------------------------------------------------------
Interest and debt expense 346 317 436
Research and development expenses 179 206 229
Currency transaction (losses) gains * $(64) $ 46 $ 90
==============================================================================
* INCLUDES $(24), $18 AND $24 IN 1994, 1993 AND 1992, RESPECTIVELY, FOR THE
COMPANY'S SHARE OF AFFILIATES' CURRENCY TRANSACTION EFFECTS.
The excess of current cost (based on average acquisition costs for the year)
over the carrying value of inventories for which the LIFO method is used was
$684, $671 and $803 at December 31, 1994, 1993 and 1992, respectively.
NOTE 4. INFORMATION RELATING TO THE CONSOLIDATED STATEMENT OF CASH FLOWS The
Consolidated Statement of Cash Flows excludes the following non-cash
transactions:
In 1994, the company took delivery of a new tanker under a capital lease
arrangement. This asset was recorded as a $65 million addition to properties,
plant and equipment and to capital lease obligations.
The company's Employee Stock Ownership Plan (ESOP) repaid $40 and $30 of
matured debt guaranteed by Chevron Corporation in 1994 and 1993, respectively.
The company reflected this payment as reductions in debt outstanding and in
Deferred Compensation - ESOP.
In 1993, the company acquired a 50 percent interest in the Tengizchevroil joint
venture (TCO) in the Republic of Kazakhstan through a series of cash and
non-cash transactions. The company's interest in TCO is accounted for using the
equity method of accounting and is recorded in "Investments and advances" in
the consolidated balance sheet. The cash expended in connection with the
formation of TCO and subsequent advances to TCO have been included in the
consolidated statement of cash flows in "Capital expenditures." The deferred
payment portion of the TCO investment totaled $709 at December 31, 1993, and
$466 at year-end 1994 and is recorded in "Accrued liabilities" and "Deferred
credits and other non-current obligations" in the consolidated balance sheet.
Payments in 1993 and 1994 related to the deferred portion of the TCO investment
were classified as "Repayments of long-term debt and other financing
obligations" in the consolidated statement of cash flows.
The company refinanced an aggregate amount of $334 and $57 in tax exempt
long-term debt and capital lease obligations in 1993 and 1992, respectively.
These refinancings are not reflected in the consolidated statement of cash
flows.
In 1992, the company received 31,500,000 shares of its common stock held by a
stockholder in exchange for the stock of a subsidiary owning certain U.S. oil
and gas producing properties and related facilities, cash and other current
assets and current liabilities. The value attributed to the treasury shares
received was $1,100. The property exchanged consisted of properties, plant and
equipment with a carrying value of $790 and, excluding cash, net current
liabilities of $1. Cash of $57 was included as a reduction of proceeds from
asset sales.
In 1992, the company acquired an additional ownership interest in an affiliate,
accounted for under the equity method, in a non-cash transaction. This increase
in ownership required the consolidation of the affiliate into the company's
financial statements. The principal result of this consolidation was to
increase non-current assets and liabilities by approximately $64.
There have been other non-cash transactions that have occurred during the years
presented. These include the reissuance of treasury shares for management
compensation plans; acquisitions of properties, plant and equipment through
capital lease transactions; and changes in stockholders' equity, long-term debt
and other liabilities resulting from the accounting for the company's ESOP. The
amounts for these transactions have not been material in the aggregate in
relation to the company's financial position.
The major components of "Capital expenditures," and the reconciliation of this
amount to the capital and exploratory expenditures, excluding equity in
affiliates, presented in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," are presented below:
YEAR ENDED DECEMBER 31
-------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
Additions to properties, plant and equipment * $3,112 $3,214 $3,342
Additions to investments 284 179 47
Payments for other assets and (liabilities), net 9 (70) (37)
- ------------------------------------------------------------------------------
Capital expenditures 3,405 3,323 3,352
Expensed exploration expenditures 326 330 450
Payments of long-term debt
and other financing obligations 242 86 -
- ------------------------------------------------------------------------------
Capital and exploratory expenditures,
excluding equity companies $3,973 $3,739 $3,802
==============================================================================
* 1994 EXCLUDES NON-CASH CAPITAL LEASE ADDITION OF $65.
NOTE 5. STOCKHOLDERS' EQUITY Retained earnings at December 31, 1994 and 1993,
include $2,265 and $2,087, respectively, for the company's share of
undistributed earnings of equity affiliates.
At the company's annual meeting on May 3, 1994, stockholders approved an
increase in the authorized shares of common stock from 500 million to 1 billion
and approved a two-for-one split of the company's issued common stock,
effective May 11, 1994. All share and per-share amounts prior to that date have
been restated to reflect the stock split.
In 1988, the company declared a dividend distribution of one Right for each
outstanding share of common stock. The Rights will be exercisable, unless
redeemed earlier by the company, if a person or group acquires, or obtains the
right to acquire, 10 percent or more of the outstanding shares of common stock
or commences a tender or exchange offer that would result in acquiring 10
percent or more of the outstanding shares of common stock, either event
occurring without the prior consent of the company. Each Right entitles its
holder to purchase stock having a value equal to two times the exercise price
of the
FS-20
NOTE 5. STOCKHOLDERS' EQUITY - Continued
Right. The person or group who had acquired 10 percent or more of the
outstanding shares of common stock without the prior consent of the company
would not be entitled to this purchase opportunity.
The Rights will expire in November 1998, or they may be redeemed by the company
at 5 cents per share prior to that date. The Rights do not have voting or
dividend rights and, until they become exercisable, have no dilutive effect on
the earnings of the company. Twenty million shares of the company's preferred
stock have been designated Series A participating preferred stock and reserved
for issuance upon exercise of the Rights.
No event during 1994 made the Rights exercisable.
NOTE 6. FINANCIAL INSTRUMENTS
OFF BALANCE SHEET RISK. The company enters into forward exchange contracts,
generally with terms of 90 days or less, as a hedge against some of its foreign
currency exposures, primarily anticipated purchase transactions forecasted to
occur within 90 days. At December 31, 1994 and 1993, the notional amounts were
$60 and $114, respectively.
The company enters into interest rate swaps as part of its overall strategy to
manage the interest rate risk on its debt. Under the terms of the swaps, net
cash settlements, based on the difference between fixed-rate and floating-rate
interest amounts calculated by reference to agreed notional principal amounts,
are made either semi-annually or annually, and are recorded monthly as
"Interest and debt expense." At December 31, 1994, the notional principal
amounts of the swaps held by the company totaled $850, and the contracts have
remaining terms of between two to five years.
The impact of the swaps and forward exchange contracts on the company's results
of operations is not material.
The company utilizes certain derivative financial instruments as hedges to
manage a small portion of its exposure to price volatility stemming from its
integrated petroleum activities. Relatively straightforward and involving
little complexity, these instruments consist mainly of crude oil futures
contracts traded on the International Petroleum Exchange and natural gas swap
contracts, entered into principally with major financial institutions. The
futures contracts hedge anticipated crude oil purchases and sales, generally
forecasted to occur within a ninety-day period. Natural gas swaps are primarily
used to hedge firmly committed sales, and the terms of the swap contracts held
have an average maturity of twelve months, mirroring the terms of the committed
sales. Gains and losses on the instruments offset, and are recognized
concurrently with gains and losses associated with the underlying commodities.
CONCENTRATIONS OF CREDIT RISK. The company's financial instruments that are
exposed to concentrations of credit risk consist primarily of its cash
equivalents, marketable securities, derivative financial instruments and trade
receivables.
The company's short-term investments are placed with various foreign
governments and a wide array of financial institutions with high credit
ratings. This diversified investment policy limits the company's exposure both
to credit risk and to concentration of credit risk. Similar standards of
diversity and creditworthiness are applied to the company's counterparties in
derivative financial instruments.
The trade receivable balances, reflecting the company's diversified sources of
revenue, are dispersed among the company's broad customer base worldwide. As a
consequence, concentrations of credit risk are limited. The company routinely
assesses the financial strength of its customers. Letters of credit are the
principal security obtained to support lines of credit or negotiated contracts
when the financial strength of a customer is not considered sufficient.
FAIR VALUE. At December 31, 1994, the company's long-term debt of $2,155 had an
estimated fair value of $2,127. The fair value is based on quoted market prices
at December 31, 1994, or the present value of expected cash flows when a quoted
market price was not available.
At December 31, 1994, the company held crude oil futures contracts and natural
gas swap contracts with approximate negative fair values totaling $(38).
The company holds cash equivalents and U.S. dollar marketable securities in
domestic and offshore portfolios. Eurodollar bonds and floating rate notes are
the primary instruments held. At December 31, 1994, cash equivalents and
marketable securities had a fair value of $1,178. Of this balance, $285
classified as cash equivalents had average maturities under 90 days, while the
remainder, classified as marketable securities, had an average maturity of 4
years.
NOTE 7. SUMMARIZED FINANCIAL DATA - CHEVRON U.S.A. INC. At December 31, 1994,
Chevron U.S.A. Inc. was Chevron Corporation's principal operating company,
consisting primarily of the company's U.S. integrated petroleum operations
(excluding most of the domestic pipeline operations). These operations are
conducted by three divisions: Chevron U.S.A. Production Company, Chevron U.S.A.
Products Company and Warren Petroleum Company. Summarized financial
information for Chevron U.S.A. Inc. and its consolidated subsidiaries is
presented below:
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
Sales and other operating revenues $25,833 $28,092 $29,454
Total costs and other deductions 25,367 27,588 28,410
Income before cumulative effect
of changes in accounting principles 501 325 811
Cumulative effect of changes
in accounting principles - - (573)
Net income 501 325 238
==============================================================================
AT DECEMBER 31
------------------
1994 1993
- ------------------------------------------------------------------------------
Current assets $ 3,341 $ 3,661
Other assets 14,136 14,099
Current liabilities 6,347 5,936
Other liabilities 5,599 5,738
Net equity 5,531 6,086
==============================================================================
FS-21
NOTE 8. LITIGATION The company is a defendant in numerous lawsuits. Plaintiffs
may seek to recover large and sometimes unspecified amounts, and some matters
may remain unresolved for several years.
A lawsuit brought against the company by OXY USA Inc., the successor in
interest to Cities Service Company, remains pending in an Oklahoma state court.
The suit involves claims for breach of contract and misrepresentation related
to the termination of Gulf Oil Corporation's offer to purchase Cities' stock in
1982. (Gulf was acquired by Chevron in 1984.) OXY also asserts that the company
improperly interfered with a proposed settlement of claims brought against OXY
by the Department of Energy.
Management is of the opinion that resolution of the lawsuits will not result in
any significant liability to the company in relation to its consolidated
financial position or liquidity.
NOTE 9. GEOGRAPHIC AND SEGMENT DATA The geographic and segment distributions of
the company's identifiable assets, operating income and sales and other
operating revenues are summarized in the following tables.
AT DECEMBER 31
------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
United States
Petroleum $15,540 $16,443 $18,508
Chemicals 1,992 2,045 2,165
Coal and Other Minerals 592 744 762
- ------------------------------------------------------------------------------
Total United States 18,124 19,232 21,435
- ------------------------------------------------------------------------------
International
Petroleum 12,493 12,202 9,671
Chemicals 411 412 390
Coal and Other Minerals 45 13 10
- ------------------------------------------------------------------------------
Total International 12,949 12,627 10,071
- ------------------------------------------------------------------------------
TOTAL IDENTIFIABLE ASSETS 31,073 31,859 31,506
Corporate and Other 3,334 2,877 2,464
- ------------------------------------------------------------------------------
TOTAL ASSETS $34,407 $34,736 $33,970
==============================================================================
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
OPERATING INCOME
United States
Petroleum $ 831 $ 692 $ 1,693
Chemicals 241 162 46
Coal and Other Minerals 60 59 68
- ------------------------------------------------------------------------------
Total United States 1,132 913 1,807
- ------------------------------------------------------------------------------
International
Petroleum 1,672 1,772 1,731
Chemicals 81 63 70
Coal and Other Minerals 79 (3) 177
- ------------------------------------------------------------------------------
Total International 1,832 1,832 1,978
- ------------------------------------------------------------------------------
TOTAL OPERATING INCOME 2,964 2,745 3,785
Corporate and Other (161) (319) (322)
Income Tax Expense (1,110) (1,161) (1,253)
- ------------------------------------------------------------------------------
Income before cumulative effect of
changes in accounting principles $ 1,693 $ 1,265 $ 2,210
Cumulative effect of changes in
accounting principles - - (641)
- ------------------------------------------------------------------------------
NET INCOME $ 1,693 $ 1,265 $ 1,569
==============================================================================
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
SALES AND OTHER OPERATING REVENUES
United States
Petroleum-Refined products $11,690 $13,169 $13,964
-Crude oil 3,466 4,086 5,138
-Natural gas 1,755 1,776 1,631
-Natural gas liquids 1,072 1,098 1,075
-Other petroleum revenues 637 682 700
-Excise taxes 2,977 2,554 2,458
-Intersegment 977 924 1,052
------------------------------
Total Petroleum 22,574 24,289 26,018
------------------------------
Chemicals-Products 2,528 2,211 2,409
-Intersegment 273 248 266
------------------------------
Total Chemicals 2,801 2,459 2,675
------------------------------
Coal and Other Minerals-Products 415 447 395
------------------------------
Total United States 25,790 27,195 29,088
- ------------------------------------------------------------------------------
International
Petroleum-Refined products 2,638 2,920 2,857
-Crude oil 4,783 4,415 4,893
-Natural gas 383 380 364
-Natural gas liquids 108 137 115
-Other petroleum revenues 307 285 227
-Excise taxes 1,797 1,499 1,490
-Intersegment (2) 1 10
------------------------------
Total Petroleum 10,014 9,637 9,956
------------------------------
Chemicals-Products 537 497 463
-Excise taxes 16 15 16
-Intersegment 8 6 5
------------------------------
Total Chemicals 561 518 484
------------------------------
Coal and Other Minerals-Products 1 - 2
------------------------------
Total International 10,576 10,155 10,442
- ------------------------------------------------------------------------------
Intersegment sales elimination (1,256) (1,179) (1,333)
- ------------------------------------------------------------------------------
Corporate and Other 20 20 15
- ------------------------------------------------------------------------------
TOTAL SALES AND OTHER OPERATING REVENUES $35,130 $36,191 $38,212
==============================================================================
Memo: Intergeographic Sales
United States $ 512 $ 266 $ 309
International 1,803 4,418 3,823
==============================================================================
The company's primary business is its integrated petroleum operations.
Secondary operations include chemicals and coal. The company's real estate and
insurance operations and worldwide cash management and financing activities are
in "Corporate and Other."
Beginning January 1, 1994, the company no longer distributes certain corporate
expenses to its business segments. Prior to 1994, these expenses were allocated
on the basis of each segment's identifiable assets (including an allocation to
"Corporate and Other"). Starting in 1994, segments are billed for direct
corporate services; unbilled corporate expenses are included in "Corporate and
Other." The company believes this better reflects the current organizational
and management structure of its business units and corporate departments.
FS-22
NOTE 9. GEOGRAPHIC AND SEGMENT DATA - Continued
As a result of the change, "Corporate and Other" in 1994 included $232 of
before-tax expenses that, under the previous method, would have reduced segment
operating income. There was no change in the net income of the company.
Also in connection with the change, the company no longer allocates certain
corporate identifiable assets to the business segments. At December 31, 1994,
"Corporate and Other" included $1,259 of identifiable assets that in previous
years would have been included in the identifiable assets of the business
segments.
These changes resulted in an increase to 1994 U.S. and International Petroleum
operating income of $101 and $111, respectively. Identifiable assets at
December 31, 1994 for U.S. and International Petroleum were reduced $630 and
$506, respectively. The effect of these changes on 1994 operating income and
year-end 1994 identifiable assets of the company's other segments and
geographic areas was not material.
Identifiable assets for the business segments include all assets associated
with operations in the indicated geographic areas, including investments in
affiliates.
Sales and other operating revenues for the petroleum segment are derived from
the production and sale of crude oil, natural gas and natural gas liquids, and
from the refining and marketing of petroleum products. The company also obtains
revenues from the transportation and trading of crude oil and refined products.
Chemicals revenues result primarily from the sale of petrochemicals, plastic
resins, and lube oil and fuel additives. Coal and other minerals revenues
relate primarily to coal sales. During 1994, the company completed its
withdrawal from non-coal minerals activities.
Sales and other operating revenues in the above table include both sales to
unaffiliated customers and sales from the transfer of products between
segments. Sales from the transfer of products between segments and geographic
areas are generally at estimated market prices. Transfers between geographic
areas are presented as memo items below the table.
Equity in earnings of affiliated companies has been associated with the
segments in which the affiliates operate. Sales to the Caltex Group are
included in the "International Petroleum" segment. Information on the Caltex
and Tengizchevroil affiliates is presented in Note 11. Other affiliates are
either not material or not vertically integrated with a segment's operations.
NOTE 10. LEASE COMMITMENTS Certain non-cancelable leases are classified as
capital leases, and the leased assets are included as part of "Properties,
plant and equipment." Other leases are classified as operating leases and are
not capitalized. Details of the capitalized leased assets are as follows:
AT DECEMBER 31
------------------
1994 1993
- ------------------------------------------------------------------------------
Petroleum
Exploration and Production $ 45 $ 50
Refining, Marketing and Transportation 618 554
- -----------------------------------------------------------------------------
663 604
Less: accumulated amortization 398 409
- -----------------------------------------------------------------------------
Net capitalized leased assets $265 $195
=============================================================================
At December 31, 1994, the future minimum lease payments under operating and
capital leases are as follows:
AT DECEMBER 31
-------------------
OPERATING CAPITAL
YEAR LEASES LEASES
- -----------------------------------------------------------------------------
1995 $158 $ 64
1996 144 60
1997 131 56
1998 114 52
1999 107 44
Thereafter 218 659
- -----------------------------------------------------------------------------
Total $872 935
- -------------------------------------------------------------------
Less: amounts representing interest and executory costs (456)
- -----------------------------------------------------------------------------
Net present value 479
Less: capital lease obligations included in short-term debt (306)
- -----------------------------------------------------------------------------
Long-term capital lease obligations $173
=============================================================================
Future sublease rental income $ 43 $ -
=============================================================================
Rental expenses incurred for operating leases during 1994, 1993 and 1992 were
as follows:
YEAR ENDED DECEMBER 31
----------------------------
1994 1993 1992
- -----------------------------------------------------------------------------
Minimum rentals $410 $452 $408
Contingent rentals 7 9 10
- -----------------------------------------------------------------------------
Total 417 461 418
Less: sublease rental income 14 15 14
- -----------------------------------------------------------------------------
Net rental expense $403 $446 $404
=============================================================================
Contingent rentals are based on factors other than the passage of time,
principally sales volumes at leased service stations. Certain leases include
escalation clauses for adjusting rentals to reflect changes in price indices,
renewal options ranging from one to 25 years and/or options to purchase the
leased property during or at the end of the initial lease period for the fair
market value at that time.
FS-23
NOTE 11. INVESTMENTS AND ADVANCES Investments in and advances to companies
accounted for using the equity method, and other investments accounted for at
or below cost, are as follows:
AT DECEMBER 31
------------------
1994 1993
- ------------------------------------------------------------------------------
Equity method affiliates
Caltex Group $2,362 $2,147
Tengizchevroil 1,153 927
Other affiliates 346 426
- ------------------------------------------------------------------------------
3,861 3,500
Other, at or below cost 130 123
- ------------------------------------------------------------------------------
Total investments and advances $3,991 $3,623
==============================================================================
Chevron owns 50 percent each of P.T. Caltex Pacific Indonesia, an exploration
and production company operating in Indonesia; Caltex Petroleum Corporation,
which, through its subsidiaries and affiliates, conducts refining and marketing
activities in Asia, Africa, Australia and New Zealand; and American Overseas
Petroleum Limited, which, through its subsidiaries, manages certain of the
company's exploration and production operations in Indonesia. These companies
and their subsidiaries and affiliates are collectively called the Caltex Group.
Tengizchevroil (TCO) is a 50 percent owned joint venture formed in 1993 with
the Republic of Kazakhstan to develop the Tengiz and Korolev oil fields over a
40-year period. The investment in TCO at December 31, 1994 and 1993 included a
deferred payment portion of $466 and $709 respectively, $420 of which is
payable to the Republic of Kazakhstan upon the attainment of a dedicated export
system with the capability of the greater of 260,000 barrels of oil per day or
TCO's production capacity. This portion of the investment was recorded upon
formation of the venture as the company believed at the time, and continues to
believe, that its payment is beyond a reasonable doubt given the original
intent and continuing commitment of both parties to realizing the full
potential of the venture over its 40-year life.
Equity in earnings of companies accounted for by the equity method, together
with dividends and similar distributions received from equity method companies
for the years 1994, 1993 and 1992, are as follows:
YEAR ENDED DECEMBER 31
-----------------------------------------------------
EQUITY IN EARNINGS DIVIDENDS
------------------------- -------------------------
1994 1993 1992 1994 1993 1992
- ------------------------------------------------------------------------------
Caltex Group $350 $361 $334* $239 $172 $183
Tengizchevroil (10) (1) - - - -
Other affiliates 100 80 72 146 95 79
- ------------------------------------------------------------------------------
Total $440 $440 $406 $385 $267 $262
==============================================================================
* BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES.
The company's transactions with affiliated companies, primarily for the
purchase of Indonesian crude oil from P.T. Caltex Pacific Indonesia and the
sale of crude oil and products to Caltex Petroleum Corporation's refining and
marketing companies, are summarized in the adjacent table.
Accounts and notes receivable in the consolidated balance sheet include $135
and $156 at December 31, 1994 and 1993, respectively, of amounts due from
affiliated companies. Accounts payable include $46 and $35 at December 31, 1994
and 1993, respectively, of amounts due to affiliated companies.
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
Sales to Caltex Group $1,166 $1,739 $1,784
Sales to other affiliates 7 5 5
- ------------------------------------------------------------------------------
Total sales to affiliates $1,173 $1,744 $1,789
==============================================================================
Purchases from Caltex Group $ 800 $ 842 $ 797
Purchases from other affiliates 52 101 56
- ------------------------------------------------------------------------------
Total purchases from affiliates $ 852 $ 943 $ 853
==============================================================================
The following tables summarize the combined financial information for the
Caltex Group and substantially all of the other equity method companies
together with Chevron's share. Amounts shown for the affiliates are 100
percent.
CALTEX GROUP OTHER AFFILIATES CHEVRON'S SHARE
---------------------------- --------------------------- --------------------------
YEAR ENDED DECEMBER 31 1994 1993 1992 1994 1993 1992 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
Sales and other operating revenues $14,751 $15,409 $17,281 $2,237 $1,972 $1,995 $8,176 $8,229 $9,148
Total costs and other deductions 13,860 14,392 16,255 1,815 1,542 1,458 7,500 7,633 8,543
Net income 689 720 720* 357 374 416 440 440 431
=================================================================================================================================
* AFTER CUMULATIVE EFFECT OF $51 BENEFIT FROM ADOPTION OF SFAS 106 AND 109, OF WHICH CHEVRON'S SHARE OF $25 IS INCLUDED IN
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES IN THE CONSOLIDATED STATEMENT OF INCOME.
CALTEX GROUP OTHER AFFILIATES CHEVRON'S SHARE
---------------------------- --------------------------- --------------------------
AT DECEMBER 31 1994 1993 1992 1994 1993 1992 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
Current assets $ 2,421 $ 2,123 $ 2,378 $ 913 $ 766 $ 788 $1,446 $1,256 $1,375
Other assets 7,389 6,266 5,485 4,216 3,871 2,186 5,396 4,731 3,433
Current liabilities 3,072 2,411 2,453 543 471 540 1,617 1,332 1,364
Other liabilities 2,005 1,683 1,591 3,225 2,620 746 1,364 1,155 1,090
Net equity 4,733 4,295 3,819 1,361 1,546 1,688 3,861 3,500 2,354
=================================================================================================================================
FS-24
NOTE 12. PROPERTIES, PLANT AND EQUIPMENT
AT DECEMBER 31 YEAR ENDED DECEMBER 31
--------------------------------------------------- --------------------------------------------------------
GROSS INVESTMENT AT COST NET INVESTMENT ADDITIONS AT COST (1) DEPRECIATION EXPENSE
------------------------- ------------------------- -------------------------- -----------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
UNITED STATES
Petroleum
Exploration and
Production $17,980 $17,608 $17,707 $ 5,900 $ 6,189 $ 6,703 $ 675 $ 663 $ 609 $ 983 $1,064 $1,264
Refining and
Marketing 11,442 10,693 10,762 6,524 6,187 6,345 899 960 980 460 460 430
Chemicals 1,915 1,899 1,803 1,150 1,225 1,219 89 174 182 131 124 127
Coal and
Other Minerals 869 848 836 461 488 511 30 32 58 54 54 50
- ----------------------------------------------------------------------------------------------------------------------------------
Total United States 32,206 31,048 31,108 14,035 14,089 14,778 1,693 1,829 1,829 1,628 1,702 1,871
- ----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL
Petroleum
Exploration and
Production 9,661 8,729 7,892 4,800 4,353 3,980 1,051 1,014 1,000 578 519 496
Refining and
Marketing 2,482 2,385 2,367 1,743 1,686 1,658 218 219 304 114 106 97
Chemicals 330 313 280 143 148 142 25 24 26 27 25 18
Coal and
Other Minerals 21 12 11 19 10 7 12 3 1 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total International 12,494 11,439 10,550 6,705 6,197 5,787 1,306 1,260 1,331 719 650 611
- ----------------------------------------------------------------------------------------------------------------------------------
Corporate and
Other (2) 2,110 2,320 2,352 1,433 1,579 1,623 125 96 209 84 100 112
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $46,810 $44,807 $44,010 $22,173 $21,865 $22,188 $3,124 $3,185 $3,369 $2,431 $2,452 $2,594
==================================================================================================================================
(1) NET OF DRY HOLE EXPENSE RELATED TO PRIOR YEARS' EXPENDITURES OF $53, $29 AND $57 IN 1994, 1993 AND 1992, RESPECTIVELY.
(2) INCLUDES PRIMARILY REAL ESTATE AND MANAGEMENT INFORMATION SYSTEMS.
Expenses for maintenance and repairs were $928, $875 and $1,045 in 1994, 1993
and 1992, respectively.
NOTE 13. TAXES
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
Taxes Other Than on Income
United States
Taxes on production $ 102 $ 135 $ 140
Import duties 21 21 18
Excise taxes on products and merchandise 2,978 2,554 2,458
Property and other miscellaneous taxes 374 380 416
Payroll taxes 112 122 141
- ------------------------------------------------------------------------------
Total United States 3,587 3,212 3,173
- ------------------------------------------------------------------------------
International
Taxes on production 14 7 30
Import duties 11 22 55
Excise taxes on products and merchandise 1,812 1,514 1,506
Property and other miscellaneous taxes 116 112 114
Payroll taxes 19 19 21
- ------------------------------------------------------------------------------
Total International 1,972 1,674 1,726
- ------------------------------------------------------------------------------
Total taxes other than on income $5,559 $4,886 $4,899
- ------------------------------------------------------------------------------
U.S. federal income tax expense was reduced by $60, $57 and $49 in 1994, 1993
and 1992, respectively, for low-income housing and other business tax credits.
In 1994, before-tax income for U.S. operations was $1,194 compared with $687 in
1993 and $1,592 in 1992. Before-tax income for international operations was
$1,609, $1,739 and $1,871 in 1994, 1993 and 1992, respectively.
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
Taxes on Income
U.S. federal
Current $ 175 $ 394 $ 329
Deferred 43 (241) (129)
Deferred - Adjustment for enacted
changes in tax laws/rates - 54 -
State and local 10 63 54
- ------------------------------------------------------------------------------
Total United States 228 270 254
- ------------------------------------------------------------------------------
International
Current 815 864 1,046
Deferred 67 48 (47)
Deferred - Adjustment for enacted
changes in tax laws/rates - (21) -
- ------------------------------------------------------------------------------
Total International 882 891 999
- ------------------------------------------------------------------------------
Total taxes on income $1,110 $1,161 $1,253
==============================================================================
The deferred income tax provisions included (costs) benefits of $(222), $98 and
$163 related to properties, plant and equipment in 1994, 1993 and 1992,
respectively. U.S. benefits were recorded in 1993 related to the U.S. refining
and marketing restructuring provision.
In 1992, the tax related to the cumulative effect of adopting SFAS 106 (Note 2)
was $423, representing deferred income tax benefits approximating the statutory
tax rate.
FS-25
NOTE 13. TAXES - Continued
The company's effective income tax rate varied from the U.S. statutory federal
income tax rate because of the following:
YEAR ENDED DECEMBER 31
------------------------------
1994 1993 1992
- ------------------------------------------------------------------------------
Statutory U.S. federal income tax rate 35.0% 35.0% 34.0%
Effects of income taxes on international
operations in excess of taxes at the
U.S. statutory rate 18.5 15.6 15.2
Effects of asset dispositions - (0.6) (8.0)
State and local taxes on income,
net of U.S. federal income tax benefit 0.2 2.2 1.1
Prior-year tax adjustments (4.4) 3.0 (0.6)
Effects of enacted changes in tax
laws/rates on deferred tax liabilities - 1.3 -
Tax credits (2.1) (2.4) (1.4)
All others (3.2) (0.9) (0.9)
- ------------------------------------------------------------------------------
Consolidated companies 44.0 53.2 39.4
Effect of recording equity in income of certain
affiliated companies on an after-tax basis (4.4) (5.3) (3.2)
- ------------------------------------------------------------------------------
Effective tax rate 39.6% 47.9% 36.2%
==============================================================================
The company records its deferred taxes on a tax jurisdiction basis and
classifies those net amounts as current or noncurrent based on the balance
sheet classification of the related assets or liabilities.
At December 31, 1994 and 1993, deferred taxes were classified in the
consolidated balance sheet, as follows:
AT DECEMBER 31
------------------
1994 1993
- ------------------------------------------------------------------------------
Prepaid expenses and other current assets $ (112) $ (495)
Deferred charges and other assets (148) (146)
Federal and other taxes on income 18 27
Non-current deferred income taxes 2,674 2,916
- ------------------------------------------------------------------------------
Total deferred taxes, net $2,432 $2,302
==============================================================================
The reported deferred tax balances are composed of the following deferred tax
liabilities (assets):
AT DECEMBER 31
------------------
1994 1993*
- ------------------------------------------------------------------------------
Properties, plant and equipment $4,451 $4,201
Inventory 240 293
Miscellaneous 254 237
- ------------------------------------------------------------------------------
Deferred tax liabilities 4,945 4,731
- ------------------------------------------------------------------------------
Abandonment/environmental reserves (1,066) (910)
Employee benefits (564) (535)
AMT/other tax credits (711) (486)
Other accrued liabilities (299) (472)
Miscellaneous (523) (523)
- ------------------------------------------------------------------------------
Deferred tax assets (3,163) (2,926)
- ------------------------------------------------------------------------------
Deferred tax assets valuation allowance 650 497
- ------------------------------------------------------------------------------
Total deferred taxes, net $2,432 $2,302
==============================================================================
* CERTAIN 1993 AMOUNTS HAVE BEEN RECLASSIFIED TO CONFORM TO THE 1994
PRESENTATION.
It is the company's policy for subsidiaries included in the U.S. consolidated
tax return to record income tax expense as though they filed separately, with
the parent recording the adjustment to income tax expense for the effects of
consolidation.
Undistributed earnings of international consolidated subsidiaries and
affiliates for which no deferred income tax provision has been made for
possible future remittances totaled approximately $3,815 at December 31, 1994.
Substantially all of this amount represents earnings reinvested as part of the
company's ongoing business. It is not practical to estimate the amount of taxes
that might be payable on the eventual remittance of such earnings. On
remittance, certain countries impose withholding taxes that, subject to certain
limitations, are then available for use as tax credits against a U.S. tax
liability, if any. The company estimates withholding taxes of approximately
$258 would be payable upon remittance of these earnings.
NOTE 14. SHORT-TERM DEBT
AT DECEMBER 31
-----------------
1994 1993
- ------------------------------------------------------------------------------
Commercial paper (1) $5,036 $4,391
Current maturities of long-term debt 134 167
Current maturities of long-term capital leases 33 23
Redeemable long-term obligations
Long-term debt 315 297
Capital leases 273 255
Notes payable 23 203
- ------------------------------------------------------------------------------
Subtotal (2) 5,814 5,336
Reclassified to long-term debt (1,800) (1,880)
- ------------------------------------------------------------------------------
Total short-term debt $4,014 $3,456
==============================================================================
(1) WEIGHTED AVERAGE INTEREST RATES AT DECEMBER 31, 1994 AND 1993 WERE 6.0%
AND 3.3%, RESPECTIVELY.
(2) WEIGHTED AVERAGE INTEREST RATES AT DECEMBER 31, 1994 AND 1993 WERE 5.8%
AND 3.4%, RESPECTIVELY.
Redeemable long-term obligations consist primarily of tax-exempt variable-rate
put bonds that are included as current liabilities because they become
redeemable at the option of the bondholders during the year following the
balance sheet date.
NOTE 15. LONG-TERM DEBT
AT DECEMBER 31
-----------------
1994 1993
- ------------------------------------------------------------------------------
8.11% amortizing notes due 2004 (1) $ 750 $ 750
7.45% notes due 2004 348 -
9.375% sinking-fund debentures due 2016 278 278
5.6% notes due 1998 190 190
9.75% sinking-fund debentures due 2017 180 179
4.625% 200 million Swiss franc issue due 1997 152 136
6.90% serial notes due 1994-1997 (1),(2) 150 190
7.875% notes due 1997 (3) - 200
Other long-term obligations (7.02%) (2)
(less than $50 individually) 183 223
Other foreign currency obligations (5.45%) (2) 58 78
- ------------------------------------------------------------------------------
Total including debt due within one year 2,289 2,224
Debt due within one year (134) (167)
Reclassified from short-term debt (6.0%) (2) 1,800 1,880
- ------------------------------------------------------------------------------
Total long-term debt $3,955 $3,937
==============================================================================
(1) GUARANTEE OF ESOP DEBT.
(2) WEIGHTED AVERAGE INTEREST RATE AT DECEMBER 31, 1994.
(3) DEBT RETIRED BEFORE MATURITY DATE.
FS-26
NOTE 15. LONG-TERM DEBT - Continued
Chevron and one of its wholly owned subsidiaries each have "shelf"
registrations on file with the Securities and Exchange Commission (SEC) that
together would permit the issuance of $700 of debt securities pursuant to Rule
415 of the Securities Act of 1933.
At year-end 1994, the company had $4,425 of committed credit facilities with
banks worldwide, $1,800 of which had termination dates beyond one year. The
facilities support the company's commercial paper borrowings. Interest on any
borrowings under the agreements is based on either the London Interbank Offered
Rate or the Reserve Adjusted Domestic Certificate of Deposit Rate. No amounts
were outstanding under these credit agreements during the year nor at year-end.
At December 31, 1994 and 1993, the company classified $1,800 and $1,880,
respectively, of short-term debt as long-term. Settlement of these obligations
is not expected to require the use of working capital in 1995, as the company
has both the intent and ability to refinance this debt on a long-term basis.
Consolidated long-term debt maturing in each of the five years after December
31, 1994, is as follows: 1995-$134, 1996-$98, 1997-$246, 1998-$276 and
1999-$94.
NOTE 16. EMPLOYEE BENEFIT PLANS
PENSION PLANS. The company has defined benefit pension plans for most
employees. The principal plans provide for automatic membership on a
non-contributory basis. The retirement benefits provided by these plans are
based primarily on years of service and on average career earnings or the
highest consecutive three years' average earnings. The company's policy is to
fund at least the minimum necessary to satisfy requirements of the Employee
Retirement Income Security Act.
The net pension expense (credit) for all of the company's pension plans for the
years 1994, 1993 and 1992 consisted of:
1994 1993 1992
- ------------------------------------------------------------------------------
Cost of benefits earned during the year $ 97 $103 $106
Interest cost on projected benefit obligations 263 276 302
Actual return on plan assets (62) (472) (309)
Net amortization and deferral (294) 101 (134)
- ------------------------------------------------------------------------------
Net pension expense (credits) $ 4 $ 8 $(35)
==============================================================================
Settlement gains in 1994, related to lump-sum payments, totaled $17. In
addition to the net pension expense in 1993, the company recognized a net
settlement loss of $63 and a curtailment loss of $4 reflecting the termination
of a former Gulf pension plan and lump-sum payments from other company pension
plans. In 1992, the company recorded charges of $65 and a curtailment loss of
$7, offset by net lump-sum settlement gains of $101 related to an early
retirement program offered to employees of its U.S. and certain Canadian
subsidiaries.
At December 31, 1994 and 1993, the weighted average discount rates and
long-term rates for compensation increases used for estimating the benefit
obligations and the expected rates of return on plan assets were as follows:
1994 1993
- ------------------------------------------------------------------------------
Assumed discount rates 8.8% 7.4%
Assumed rates for compensation increases 5.1% 5.1%
Expected return on plan assets 10.1% 9.1%
==============================================================================
The pension plans' assets consist primarily of common stocks, bonds, cash
equivalents and interests in real estate investment funds. The funded status
for the company's combined plans at December 31, 1994 and 1993, was as follows:
PLANS WITH
PLANS WITH ASSETS ACCUMULATED
IN EXCESS OF BENEFITS
ACCUMULATED IN EXCESS OF
BENEFITS PLAN ASSETS
----------------- -----------------
AT DECEMBER 31 1994 1993 1994 1993
- ------------------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligations $(2,596) $(2,854) $ (186) $ (183)
==============================================================================
Accumulated benefit obligations $(2,680) $(2,949) $ (194) $ (194)
==============================================================================
Projected benefit obligations $(3,053) $(3,456) $ (222) $ (229)
Plan assets at fair values 3,626 3,831 - 1
- ------------------------------------------------------------------------------
Plan assets greater (less) than
projected benefit obligations 573 375 (222) (228)
Unrecognized net transition
(assets) liabilities (294) (349) 18 20
Unrecognized net (gains) losses (178) 41 54 74
Unrecognized prior service costs 113 84 6 7
Minimum liability adjustment - - (80) (52)
- ------------------------------------------------------------------------------
Net pension cost prepaid (accrued) $ 214 $ 151 $ (224) $ (179)
==============================================================================
The net transition assets and liabilities generally are being amortized by the
straight-line method over 15 years.
PROFIT SHARING/SAVINGS PLAN AND SAVINGS PLUS PLAN. Eligible employees of the
company and certain of its subsidiaries who have completed one year of service
may participate in the Profit Sharing/Savings Plan and the Savings Plus Plan.
Charges to expense for the profit sharing part of the Profit Sharing/Savings
Plan and the Savings Plus Plan were $75, $95 and $84 in 1994, 1993 and 1992,
respectively.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP). In December 1989, the company established
an ESOP as part of the Profit Sharing/Savings Plan. The ESOP Trust Fund
borrowed $1,000 and purchased 28.2 million previously unissued shares of the
company's common stock. The ESOP provides a partial pre-funding of the
company's future commitments to the profit sharing part of the Plan, which will
result in annual income tax savings for the company. The ESOP is expected to
satisfy most of the company's obligations to the profit sharing part of the
Plan during the next 10 years.
FS-27
NOTE 16. EMPLOYEE BENEFIT PLANS - Continued
As allowed by AICPA Statement of Position (SOP) 93-6, the company has elected
to continue its current practices which are based on SOP 76-3 and subsequent
consensuses of the Emerging Issues Task Force of the Financial Accounting
Standards Board. Accordingly, the debt of the ESOP is recorded as debt and
shares pledged as collateral are reported as deferred compensation in the
consolidated balance sheet and statement of stockholders' equity. The company
reports compensation expense equal to the ESOP debt principal repayments less
dividends received by the ESOP. Interest incurred on the ESOP debt is recorded
as interest expense. Dividends paid on ESOP shares are reflected as a reduction
of retained earnings. All ESOP shares are considered outstanding for
earnings-per-share computations.
The company recorded expense for the ESOP of $42, $60 and $50 in 1994, 1993 and
1992, respectively, including $71, $74 and $75 of interest expense related to
the ESOP debt. All dividends paid on the shares held by the ESOP are used to
service the ESOP debt. The dividends used were $50, $47 and $35 in 1994, 1993
and 1992, respectively.
The company made contributions to the ESOP of $63, $57 and $18 in 1994, 1993
and 1992, respectively, to satisfy ESOP debt service in excess of dividends
received by the ESOP. The ESOP shares were pledged as collateral for its debt.
Shares are released from a suspense account and allocated to profit sharing
accounts of plan participants, based on the debt service deemed to be paid in
the year in proportion to the total of current year and remaining debt service.
Compensation expense was $(10), $(17) and $(35) in 1994, 1993 and 1992,
respectively. The ESOP shares as of December 31 were as follows:
THOUSANDS 1994 1993
- ------------------------------------------------------------------------------
Allocated shares 5,969 5,010
Unallocated shares 21,208 22,452
- ------------------------------------------------------------------------------
Total ESOP shares 27,177 27,462
==============================================================================
MANAGEMENT INCENTIVE PLANS. The company has two incentive plans, the Management
Incentive Plan (MIP) and the Long-Term Incentive Plan (LTIP) for officers and
other regular salaried employees of the company and its subsidiaries who hold
positions of significant responsibility. The MIP makes outright distributions
of cash for services rendered or deferred awards in the form of stock units.
Awards under LTIP may take the form of, but are not limited to, stock options,
restricted stock, stock units and non-stock grants. Stock options become
exercisable not earlier than one year and not later than 10 years from the date
of grant.
The maximum number of shares of common stock that may be granted each year is 1
percent of the total outstanding shares of common stock as of January 1 of such
year. As of December 31, 1994, 5,845,260 shares were under option at exercise
prices ranging from $31.9375 to $43.875 per share. Stock option transactions
for 1994 and 1993 are as follows:
AT DECEMBER 31
------------------
THOUSANDS OF SHARES 1994 1993
- ------------------------------------------------------------------------------
Outstanding January 1 4,303 3,934
Granted 1,770 1,413
Exercised (140) (1,019)
Forfeited (88) (25)
- ------------------------------------------------------------------------------
Outstanding December 31 5,845 4,303
- ------------------------------------------------------------------------------
Exercisable December 31 4,152 2,912
==============================================================================
Charges to expense for the combined management incentive plans were $31, $36
and $20 in 1994, 1993 and 1992, respectively.
OTHER BENEFIT PLANS. In addition to providing pension benefits, the company
makes contributions toward certain health care and life insurance plans for
active and qualifying retired employees. Substantially all employees in the
United States and in certain international locations may become eligible for
coverage under these benefit plans. The company's annual contributions for
medical and dental benefits are limited to the lesser of actual medical and
dental claims or a defined fixed per capita amount. Life insurance benefits are
paid by the company and annual contributions are based on actual plan
experience.
Non-pension postretirement benefits are funded by the company when incurred. A
reconciliation of the funded status of these benefit plans is as follows:
AT DECEMBER 31, 1994 AT DECEMBER 31, 1993
-------------------------- --------------------------
HEALTH LIFE TOTAL HEALTH LIFE TOTAL
- ------------------------------------------------------------------------------
Accumulated
postretirement
benefit
obligation (APBO)
Retirees $(480) $(262) $ (742) $(593) $(320) $ (913)
Fully eligible
active
participants (120) (57) (177) (139) (64) (203)
Other active
participants (190) (37) (227) (271) (56) (327)
- ------------------------------------------------------------------------------
Total APBO (790) (356) (1,146) (1,003) (440) (1,443)
Fair value
of plan assets - - - - - -
- ------------------------------------------------------------------------------
APBO (greater) than
plan assets (790) (356) (1,146) (1,003) (440) (1,443)
Unrecognized
net (gain) loss (195) (66) (261) 63 25 88
- ------------------------------------------------------------------------------
Accrued
postretirement
benefit costs $(985) $(422) $(1,407) $(940) $(415) $(1,355)
==============================================================================
FS-28
NOTE 16. EMPLOYEE BENEFIT PLANS - Continued
The company's net postretirement benefits expense was as follows:
1994 1993 1992
----------------- ----------------- -----------------
HEALTH LIFE TOTAL HEALTH LIFE TOTAL HEALTH LIFE TOTAL
- ------------------------------------------------------------------------------
Cost of benefits
earned during
the year $23 $ 4 $ 27 $23 $ 3 $ 26 $23 $ 4 $ 27
Interest cost on
benefit obligation 71 31 102 76 30 106 70 30 100
- ------------------------------------------------------------------------------
Net post-retirement
benefits expense $94 $35 $129 $99 $33 $132 $93 $34 $127
==============================================================================
For measurement purposes, separate health care cost-trend rates were utilized
for pre-age 65 and post-age 65 retirees. The 1995 annual rates of increase were
assumed to be 4.0 percent and 4.3 percent, respectively, increasing to 8.5
percent and 7.7 percent in 1996 and gradually decreasing thereafter to the
average ultimate rates of 6.0 percent in 2000 for pre-age 65 and 5.0 percent in
2000 for post-age 65. An increase in the assumed health care cost-trend rates
of 1 percent in each year would increase the aggregate of service and interest
cost for the year 1994 by $13 and would increase the December 31, 1994
accumulated postretirement benefit obligation (APBO) by $105.
At December 31, 1994, the weighted average discount rate was 8.75 percent and
the assumed rate of compensation increase related to the measurement of the
life insurance benefit was 5.0 percent.
NOTE 17. OTHER CONTINGENT LIABILITIES AND COMMITMENTS The U.S. federal income
tax and California franchise tax liabilities of the company have been settled
through 1976 and 1987, respectively. For federal income tax purposes, all
issues other than the allocation of state income taxes and the creditability of
taxes paid to the Government of Indonesia have been resolved through 1987. The
Indonesia issue applies only to years after 1982. Settlement of open tax
matters is not expected to have a material effect on the consolidated net
assets or liquidity of the company and, in the opinion of management, adequate
provision has been made for income and franchise taxes for all years either
under examination or subject to future examination.
At December 31, 1994, the company and its subsidiaries, as direct or indirect
guarantors, had contingent liabilities of $249 for notes of affiliated
companies and $55 for notes of others.
The company and its subsidiaries have certain contingent liabilities with
respect to long-term unconditional purchase obligations and commitments,
throughput agreements and take-or-pay agreements, some of which relate to
suppliers' financing arrangements. The aggregate amount of required payments
under these various commitments are: 1995-$141; 1996-$137; 1997-$102; 1998-$89;
1999-$86; 2000 and after-$497. Total payments under the agreements were $154 in
1994, $142 in 1993 and $128 in 1992.
In March 1992, an agency within the Department of Energy (DOE) issued a
Proposed Remedial Order (PRO) claiming Chevron failed to comply with DOE
regulations in the course of its participation in the Tertiary Incentive
Program. Although the DOE regulations involved were rescinded in March 1981,
following decontrol of crude oil prices in January 1981, and the statute
authorizing the regulations expired in September 1981, the PRO purports to be
for the period April 1980 through April 1990. The PRO claimed the company
overrecouped under the regulations by $125 during the period in question.
Including interest through December 1994, the total claim amounted to $295. The
DOE is seeking to increase the claim by an additional $42, plus interest, of
alleged over-recovery. The company asserts that in fact it incurred a loss
through participation in the DOE program. Discovery has been completed and
evidentiary hearings are in progress before the Office of Hearings and Appeals.
The company is subject to loss contingencies pursuant to environmental laws and
regulations that in the future may require the company to take action to
correct or ameliorate the effects on the environment of prior disposal or
release of chemical or petroleum substances by the company or other parties.
Such contingencies may exist for various sites including, but not limited to:
Superfund sites and refineries, oil fields, service stations, terminals and
land development areas, whether operating, closed or sold. The amount of such
future cost is indeterminable due to such factors as the unknown magnitude of
possible contamination, the unknown timing and extent of the corrective actions
that may be required, the determination of the company's liability in
proportion to other responsible parties and the extent to which such costs are
recoverable from third parties. While the company provides for known
environmental obligations that are probable and reasonably estimable, the
amount of future costs may be material to results of operations in the period
in which they are recognized.
The company's operations, particularly oil and gas exploration and production,
can be affected by changing economic, regulatory and political environments in
the various countries, including the United States, in which it operates. In
certain locations, host governments have imposed restrictions, controls and
taxes, and, in others, political conditions have existed that may threaten the
safety of employees and the company's continued presence in those countries.
Internal unrest or strained relations between a host government and the company
or other governments may affect the company's operations. Those developments
have, at times, significantly affected the company's related operations and
results, and are carefully considered by management when evaluating the level
of current and future activity in such countries.
Areas in which the company has significant operations include the United
States, Australia, United Kingdom, Canada, Nigeria, Angola, Congo, Papua New
Guinea, China, Indonesia and Zaire. The company's Caltex affiliates have
significant operations in Indonesia, Japan, Korea, Australia, the Philippines,
Thailand and South Africa. The company's Tengizchevroil affiliate operates in
Kazakhstan.
FS-29
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
Unaudited
In accordance with Statement of Financial Accounting Standards No. 69,
"Disclosures about Oil and Gas Producing Activities" (SFAS 69), this section
provides supplemental information on oil and gas exploration and producing
activities of the company in six separate tables. The first three tables
provide historical cost information pertaining to costs incurred in
exploration, property acquisitions and development; capitalized costs; and
results of operations. Tables IV through VI present information on the
company's estimated net proved reserve quantities, standardized measure of
estimated discounted future net cash flows related to proved reserves, and
changes in estimated discounted future net cash flows. The Africa geographic
area includes activities in Nigeria, Angola, Zaire, Congo and other countries.
The "Other" geographic category includes activities in Australia, the United
Kingdom North Sea, Canada, Papua New Guinea and other countries. Amounts
shown for affiliated companies are Chevron's 50 percent equity share in each
of P.T. Caltex Pacific Indonesia (CPI), an exploration and production company
operating in Indonesia, and Tengizchevroil (TCO), an exploration and
production company operating in the Republic of Kazakhstan, which began
operations in April 1993.
TABLE I - COSTS INCURRED IN EXPLORATION,
PROPERTY ACQUISITIONS AND DEVELOPMENT (1)
CONSOLIDATED COMPANIES AFFILIATED COMPANIES
-------------------------------------------- --------------------
MILLIONS OF DOLLARS U.S. AFRICA OTHER TOTAL CPI TCO WORLDWIDE
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
Exploration
Wells $163 $ 48 $118 $ 329 $ - $ - $ 329
Geological and geophysical 5 29 38 72 9 - 81
Rentals and other 41 4 71 116 - - 116
- ---------------------------------------------------------------------------------------------------------------------------------
Total exploration 209 81 227 517 9 - 526
- ---------------------------------------------------------------------------------------------------------------------------------
Property acquisitions (2)
Proved (3) 95 145 4 244 - - 244
Unproved 28 19 21 68 - - 68
- ---------------------------------------------------------------------------------------------------------------------------------
Total property acquisitions 123 164 25 312 - - 312
- ---------------------------------------------------------------------------------------------------------------------------------
Development 416 276 503 1,195 140 173 1,508
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS INCURRED $748 $521 $755 $2,024 $149 $173 $2,346
=================================================================================================================================
YEAR ENDED DECEMBER 31, 1993
Exploration
Wells $123 $ 57 $126 $ 306 $ 1 $ - $ 307
Geological and geophysical 12 40 40 92 9 - 101
Rentals and other 48 7 70 125 - - 125
- ---------------------------------------------------------------------------------------------------------------------------------
Total exploration 183 104 236 523 10 - 533
- ---------------------------------------------------------------------------------------------------------------------------------
Property acquisitions (2)
Proved (3) 12 - 14 26 - 276 302
Unproved 11 9 10 30 - 420 450
- ---------------------------------------------------------------------------------------------------------------------------------
Total property acquisitions 23 9 24 56 - 696 752
- ---------------------------------------------------------------------------------------------------------------------------------
Development 475 239 566 1,280 136 35 1,451
- ---------------------------------------------------------------------------------------------------------------------------------
Total Costs Incurred $681 $352 $826 $1,859 $146 $731 $2,736
=================================================================================================================================
YEAR ENDED DECEMBER 31, 1992
Exploration
Wells $ 96 $ 59 $ 83 $ 238 $ 1 $ - $ 239
Geological and geophysical 84 48 137 269 8 - 277
Rentals and other 9 1 21 31 - - 31
- ---------------------------------------------------------------------------------------------------------------------------------
Total exploration 189 108 241 538 9 - 547
- ---------------------------------------------------------------------------------------------------------------------------------
Property acquisitions (2)
Proved (3) 19 - 36 55 - - 55
Unproved 16 1 10 27 - - 27
- ---------------------------------------------------------------------------------------------------------------------------------
Total property acquisitions 35 1 46 82 - - 82
- ---------------------------------------------------------------------------------------------------------------------------------
Development 483 189 682 1,354 171 - 1,525
- ---------------------------------------------------------------------------------------------------------------------------------
Total Costs Incurred $707 $298 $969 $1,974 $180 $ - $2,154
=================================================================================================================================
(1) INCLUDES COSTS INCURRED WHETHER CAPITALIZED OR CHARGED TO EARNINGS. EXCLUDES SUPPORT EQUIPMENT EXPENDITURES.
(2) PROVED AMOUNTS INCLUDE WELLS, EQUIPMENT AND FACILITIES ASSOCIATED WITH PROVED RESERVES; UNPROVED REPRESENTS AMOUNTS FOR
EQUIPMENT AND FACILITIES NOT ASSOCIATED WITH THE PRODUCTION OF PROVED RESERVES.
(3) DOES NOT INCLUDE PROPERTIES ACQUIRED THROUGH PROPERTY EXCHANGES.
FS-30
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - Continued
Unaudited
TABLE II - CAPITALIZED COSTS RELATING TO OIL AND GAS PRODUCING ACTIVITIES
CONSOLIDATED COMPANIES AFFILIATED COMPANIES
-------------------------------------------- --------------------
MILLIONS OF DOLLARS U.S. AFRICA OTHER TOTAL CPI TCO WORLDWIDE
- ---------------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1994
Unproved properties $ 354 $ 50 $ 213 $ 617 $ - $ 420 $ 1,037
Proved properties and
related producing assets 15,996 1,822 4,946 22,764 804 330 23,898
Support equipment 755 133 302 1,190 456 180 1,826
Deferred exploratory wells 145 44 68 257 - - 257
Other uncompleted projects 308 403 1,000 1,711 353 210 2,274
- ---------------------------------------------------------------------------------------------------------------------------------
Gross capitalized costs 17,558 2,452 6,529 26,539 1,613 1,140 29,292
- ---------------------------------------------------------------------------------------------------------------------------------
Unproved properties valuation 230 23 109 362 - - 362
Proved producing properties -
Depreciation and depletion 10,296 924 2,713 13,933 435 8 14,376
Future abandonment and restoration 1,005 221 294 1,520 14 1 1,535
Support equipment depreciation 359 60 157 576 250 16 842
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated provisions 11,890 1,228 3,273 16,391 699 25 17,115
- ---------------------------------------------------------------------------------------------------------------------------------
NET CAPITALIZED COSTS $ 5,668 $1,224 $3,256 $10,148 $ 914 $1,115 $12,177
=================================================================================================================================
AT DECEMBER 31, 1993
Unproved properties $ 404 $ 31 $ 206 $ 641 $ - $ 420 $ 1,061
Proved properties and
related producing assets 15,655 1,528 4,646 21,829 694 311 22,834
Support equipment 750 105 303 1,158 397 149 1,704
Deferred exploratory wells 139 23 60 222 - - 222
Other uncompleted projects 269 296 879 1,444 398 68 1,910
- ---------------------------------------------------------------------------------------------------------------------------------
Gross capitalized costs 17,217 1,983 6,094 25,294 1,489 948 27,731
- ---------------------------------------------------------------------------------------------------------------------------------
Unproved properties valuation 280 20 103 403 - - 403
Proved producing properties -
Depreciation and depletion 9,645 799 2,467 12,911 384 2 13,297
Future abandonment and restoration 1,002 195 276 1,473 12 1 1,486
Support equipment depreciation 338 52 149 539 233 5 777
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated provisions 11,265 1,066 2,995 15,326 629 8 15,963
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capitalized Costs $ 5,952 $ 917 $3,099 $ 9,968 $ 860 $ 940 $11,768
=================================================================================================================================
AT DECEMBER 31, 1992
Unproved properties $ 481 $ 23 $ 217 $ 721 $ - $ - $ 721
Proved properties and
related producing assets 15,682 1,358 4,087 21,127 622 - 21,749
Support equipment 685 92 270 1,047 374 - 1,421
Deferred exploratory wells 100 30 66 196 1 - 197
Other uncompleted projects 443 203 910 1,556 368 - 1,924
- ---------------------------------------------------------------------------------------------------------------------------------
Gross capitalized costs 17,391 1,706 5,550 24,647 1,365 - 26,012
- ---------------------------------------------------------------------------------------------------------------------------------
Unproved properties valuation 327 17 110 454 - - 454
Proved producing properties -
Depreciation and depletion 9,276 700 2,225 12,201 335 - 12,536
Future abandonment and restoration 967 168 226 1,361 13 - 1,374
Support equipment depreciation 296 50 133 479 218 - 697
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated provisions 10,866 935 2,694 14,495 566 - 15,061
- ---------------------------------------------------------------------------------------------------------------------------------
Net Capitalized Costs $ 6,525 $ 771 $2,856 $10,152 $ 799 $ - $10,951
=================================================================================================================================
FS-31
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - Continued
Unaudited
TABLE III - RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES (1)
The company's results of operations from oil and gas producing activities for
the years 1994, 1993 and 1992 are shown below.
Net income from exploration and production activities as reported on page FS-7
reflects income taxes computed on an effective rate basis. In accordance with
SFAS 69, income taxes below are based on statutory tax rates, reflecting
allowable deductions and tax credits. Results reported below exclude any
allocation of corporate overhead; net income for 1993 and 1992 reported on
page FS-7 includes allocated corporate overhead, but 1994 does not. Interest
expense is excluded from the results reported below and from the net income
amounts on page FS-7.
CONSOLIDATED COMPANIES AFFILIATED COMPANIES
-------------------------------------------- --------------------
MILLIONS OF DOLLARS U.S. AFRICA OTHER TOTAL CPI TCO WORLDWIDE
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
Revenues from net production
Sales $1,484 $ 353 $ 736 $ 2,573 $ 24 $ 86 $ 2,683
Transfers 1,598 960 642 3,200 531 - 3,731
- ---------------------------------------------------------------------------------------------------------------------------------
Total 3,082 1,313 1,378 5,773 555 86 6,414
Production expenses (2) (1,219) (222) (399) (1,840) (184) (65) (2,089)
Proved producing properties depreciation,
depletion and abandonment provision (885) (153) (326) (1,364) (53) (17) (1,434)
Exploration expenses (132) (52) (192) (376) (9) - (385)
Unproved properties valuation (21) (3) (15) (39) - - (39)
Other income (expense) (3) 22 (50) (21) (49) (26) (8) (83)
- ---------------------------------------------------------------------------------------------------------------------------------
Results before income taxes 847 833 425 2,105 283 (4) 2,384
Income tax expense (314) (569) (252) (1,135) (143) (6) (1,284)
- ---------------------------------------------------------------------------------------------------------------------------------
RESULTS OF PRODUCING OPERATIONS $ 533 $ 264 $ 173 $ 970 $ 140 $(10) $ 1,100
=================================================================================================================================
YEAR ENDED DECEMBER 31, 1993
Revenues from net production
Sales $1,539 $ 247 $ 779 $ 2,565 $ 22 $ 41 $ 2,628
Transfers 1,912 1,040 661 3,613 487 - 4,100
- ---------------------------------------------------------------------------------------------------------------------------------
Total 3,451 1,287 1,440 6,178 509 41 6,728
Production expenses (1,274) (208) (402) (1,884) (161) (43) (2,088)
Proved producing properties depreciation,
depletion and abandonment provision (958) (126) (311) (1,395) (50) (8) (1,453)
Exploration expenses (99) (79) (174) (352) (9) - (361)
Unproved properties valuation (31) (4) (12) (47) - - (47)
Other income (expense) (3) 20 - 8 28 (3) 9 34
- ---------------------------------------------------------------------------------------------------------------------------------
Results before income taxes 1,109 870 549 2,528 286 (1) 2,813
Income tax expense (422) (625) (243) (1,290) (152) - (1,442)
- ---------------------------------------------------------------------------------------------------------------------------------
Results of Producing Operations $ 687 $ 245 $ 306 $ 1,238 $ 134 $ (1) $ 1,371
=================================================================================================================================
YEAR ENDED DECEMBER 31, 1992
Revenues from net production
Sales $1,558 $ 365 $ 816 $ 2,739 $ 19 $ - $ 2,758
Transfers 2,301 1,097 580 3,978 519 - 4,497
- ---------------------------------------------------------------------------------------------------------------------------------
Total 3,859 1,462 1,396 6,717 538 - 7,255
Production expenses (1,477) (194) (508) (2,179) (153) - (2,332)
Proved producing properties depreciation,
depletion and abandonment provision (1,126) (110) (301) (1,537) (38) - (1,575)
Exploration expenses (182) (79) (226) (487) (8) - (495)
Unproved properties valuation (38) (5) (17) (60) - - (60)
Other income (expense) (3) 431 27 72 530 (15) - 515
- ---------------------------------------------------------------------------------------------------------------------------------
Results before income taxes 1,467 1,101 416 2,984 324 - 3,308
Income tax expense (420) (856) (231) (1,507) (170) - (1,677)
- ---------------------------------------------------------------------------------------------------------------------------------
Results of Producing Operations $1,047 $ 245 $ 185 $ 1,477 $ 154 $ - $ 1,631
=================================================================================================================================
FS-32
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - Continued
Unaudited
TABLE III - RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING
ACTIVITIES (1) - Continued
CONSOLIDATED COMPANIES AFFILIATED COMPANIES
PER UNIT AVERAGE SALES PRICE AND -------------------------------------------- --------------------
PRODUCTION COST (1),(4) U.S. AFRICA OTHER TOTAL CPI TCO WORLDWIDE
- ---------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994
Average sales prices
Liquids, per barrel $13.55 $15.16 $14.16 $14.18 $12.65 $10.54 $13.90
Natural gas, per thousand cubic feet 1.76 - 1.83 1.78 - .56 1.76
Average production costs, per barrel 4.81 2.57 3.79 4.13 4.19 7.13 4.19
=================================================================================================================================
YEAR ENDED DECEMBER 31, 1993
Average sales prices
Liquids, per barrel $14.48 $16.21 $16.06 $15.33 $13.29 $10.74 $15.05
Natural gas, per thousand cubic feet 1.98 - 2.08 2.00 - .13 1.99
Average production costs, per barrel 4.91 2.62 4.22 4.34 4.19 9.82 4.38
=================================================================================================================================
YEAR ENDED DECEMBER 31, 1992
Average sales prices
Liquids, per barrel $16.02 $18.40 $17.66 $17.00 $14.87 $ - $16.77
Natural gas, per thousand cubic feet 1.69 - 1.96 1.73 - - 1.73
Average production costs, per barrel 5.11 2.44 5.85 4.78 4.23 - 4.74
=================================================================================================================================
Average sales price for liquids ($/bbl.)
DECEMBER 1994 $13.80 $15.20 $14.35 $14.36 $13.10 $10.54 $14.12
December 1993 10.73 12.94 13.63 12.05 10.72 8.58 11.82
December 1992 15.22 17.60 17.26 16.35 14.15 - 16.07
=================================================================================================================================
Average sales price for natural gas ($/MCF)
DECEMBER 1994 $ 1.62 $ - $ 1.73 $ 1.64 $ - $ .57 $ 1.63
December 1993 2.19 - 2.34 2.21 - .26 2.20
December 1992 2.17 - 1.99 2.14 - - 2.14
=================================================================================================================================
(1) THE VALUE OF OWNED PRODUCTION CONSUMED AS FUEL HAS BEEN ELIMINATED FROM REVENUES AND PRODUCTION EXPENSES, AND THE RELATED
VOLUMES HAVE BEEN DEDUCTED FROM NET PRODUCTION IN CALCULATING THE PER UNIT AVERAGE SALES PRICE AND PRODUCTION COST. THIS HAS
NO EFFECT ON THE AMOUNT OF RESULTS OF PRODUCING OPERATIONS.
(2) PRODUCTION EXPENSE IN THE U.S. IN 1994 INCLUDES $13 FOR COSTS THAT IN PRIOR YEARS WERE CONSIDERED CORPORATE OVERHEAD AND
EXCLUDED FROM THE RESULTS OF PRODUCING OPERATIONS.
(3) INCLUDES GAS-PROCESSING FEES, NET SULFUR INCOME, NATURAL GAS CONTRACT SETTLEMENTS, CURRENCY TRANSACTION GAINS AND LOSSES,
MISCELLANEOUS EXPENSES, ETC. IN 1994, THE UNITED STATES INCLUDES BEFORE-TAX NET CHARGES OF $97 RELATING TO ENVIRONMENTAL
CLEANUP PROVISIONS, LITIGATION AND REGULATORY SETTLEMENTS AND AN INSURANCE RECOVERY. IN 1993, THE UNITED STATES INCLUDES
BEFORE-TAX LOSSES ON PROPERTY DISPOSITIONS AND OTHER SPECIAL CHARGES TOTALING $150. IN 1992, BEFORE-TAX GAINS ON PROPERTY
DISPOSITIONS OF $326 IN THE UNITED STATES WERE OFFSET PARTIALLY BY NET CHARGES OF $44 FOR SEVERANCE PROGRAMS, REGULATORY
ISSUES AND OTHER ADJUSTMENTS; OTHER INCLUDES $192 OF BEFORE-TAX GAINS ON SALES OF PRODUCING AND NONPRODUCING PROPERTIES,
PARTIALLY OFFSET BY A BEFORE-TAX CHARGE OF $165 FOR THE WRITE-DOWN OF BEAUFORT SEA PROPERTIES.
(4) NATURAL GAS CONVERTED TO CRUDE OIL EQUIVALENT GAS (OEG) BARRELS AT A RATE OF 6 MCF=1 OEG BARREL.
TABLE IV - RESERVE QUANTITIES INFORMATION
The company's estimated net proved underground oil and gas reserves and changes
thereto for the years 1994, 1993 and 1992 are shown in the following table.
These quantities are estimated by the company's reserves engineers and reviewed
by the company's Reserves Advisory Committee using reserve definitions
prescribed by the Securities and Exchange Commission.
Proved reserves are the estimated quantities that geologic and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known reservoirs under existing economic and operating conditions. Due to the
inherent uncertainties and the limited nature of reservoir data, estimates of
underground reserves are subject to change over time as additional information
becomes available.
Proved reserves do not include additional quantities recoverable beyond the
term of lease or contract unless renewal is reasonably certain, or that may
result from extensions of currently proved areas, or from application of
secondary or tertiary recovery processes not yet tested and determined to be
economic.
Proved developed reserves are the quantities expected to be recovered through
existing wells with existing equipment and operating methods.
"Net" reserves exclude royalties and interests owned by others and reflect
contractual arrangements and royalty obligations in effect at the time of the
estimate.
Proved reserves for Tengizchevroil (TCO), the company's 50 percent owned
affiliate in Kazakhstan, do not include reserves that will be produced when a
dedicated export system is in place.
FS-33
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - Continued
Unaudited
TABLE IV - RESERVE QUANTITIES INFORMATION - Continued
NET PROVED RESERVES OF CRUDE OIL, CONDENSATE NET PROVED RESERVES OF NATURAL GAS
AND NATURAL GAS LIQUIDS MILLIONS OF BARRELS BILLIONS OF CUBIC FEET
--------------------------------------------------- ---------------------------------------------------
CONSOLIDATED COMPANIES AFFILIATES CONSOLIDATED COMPANIES AFFILIATES
--------------------------- ------------- WORLD- ----------------------------- ------------- WORLD-
U.S. AFRICA OTHER TOTAL CPI TCO WIDE U.S. AFRICA OTHER TOTAL CPI TCO WIDE
- ---------------------------------------------------------------------------------------------------------------------------------
RESERVES AT
JANUARY 1, 1992 1,568 636 501 2,705 451 - 3,156 6,569 - 2,680 9,249 150 - 9,399
Changes attributable to:
Revisions 38 19 24 81 34 - 115 255 - (11) 244 17 - 261
Improved recovery 23 12 2 37 198 - 235 1 - - 1 3 - 4
Extensions and
discoveries 22 27 21 70 2 - 72 346 - 19 365 - - 365
Purchases (1) 4 - 8 12 - - 12 14 - 65 79 - - 79
Sales (2) (129) - (20) (149) - - (149) (839) - (78) (917) - - (917)
Production (158) (79) (64) (301) (44) - (345) (847) - (157) (1,004) (12) - (1,016)
- ---------------------------------------------------------------------------------------------------------------------------------
RESERVES AT
DECEMBER 31, 1992 1,368 615 472 2,455 641 - 3,096 5,499 - 2,518 8,017 158 - 8,175
Changes attributable to:
Revisions (36) 42 (2) 4 53 - 57 383 - (142) 241 (4) 1 238
Improved recovery 74 - 25 99 21 - 120 7 - - 7 2 - 9
Extensions and
discoveries 24 105 18 147 2 - 149 349 - 44 393 - - 393
Purchases (1) 10 - 18 28 - 1,106 1,134 24 - 9 33 - 1,533 1,566
Sales (2) (17) - (7) (24) - - (24) (27) - (21) (48) - - (48)
Production (144) (80) (71) (295) (48) (4) (347) (751) - (151) (902) (14) (6) (922)
- ---------------------------------------------------------------------------------------------------------------------------------
RESERVES AT
DECEMBER 31, 1993 1,279 682 453 2,414 669 1,102 4,185 5,484 - 2,257 7,741 142 1,528 9,411
Changes attributable to:
Revisions 1 30 10 41 (19) 1 23 283 - (11) 272 (6) 2 268
Improved recovery 22 18 36 76 9 - 85 5 - 7 12 - - 12
Extensions and
discoveries 35 85 46 166 - - 166 533 - 675 1,208 26 - 1,234
Purchases (1) 1 76 - 77 - - 77 55 - 1 56 - - 56
Sales (2) (4) - (3) (7) - - (7) (23) - (31) (54) - - (54)
Production (134) (87) (77) (298) (56) (8) (362) (761) - (176) (937) (11) (12) (960)
- ---------------------------------------------------------------------------------------------------------------------------------
RESERVES AT
DECEMBER 31, 1994 1,200 804 465 2,469 603 1,095 4,167 5,576 - 2,722 8,298 151 1,518 9,967
=================================================================================================================================
Developed reserves
- ---------------------------------------------------------------------------------------------------------------------------------
At January 1, 1992 1,421 524 313 2,258 338 - 2,596 5,971 - 2,006 7,977 135 - 8,112
At December 31, 1992 1,251 498 315 2,064 368 - 2,432 4,812 - 1,845 6,657 150 - 6,807
At December 31, 1993 1,151 503 310 1,964 511 421 2,896 4,863 - 1,647 6,510 130 584 7,224
AT DECEMBER 31, 1994 1,097 546 293 1,936 499 414 2,849 4,919 - 1,508 6,427 135 574 7,136
=================================================================================================================================
(1) INCLUDES RESERVES ACQUIRED THROUGH PROPERTY EXCHANGES.
(2) INCLUDES RESERVES DISPOSED OF THROUGH PROPERTY EXCHANGES, INCLUDING, IN 1992 IN THE UNITED STATES, THE EXCHANGE OF AN OIL
AND GAS SUBSIDIARY FOR 31,500,000 SHARES OF CHEVRON COMMON STOCK OWNED BY A STOCKHOLDER.
TABLE V - STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO
PROVED OIL AND GAS RESERVES
The standardized measure of discounted future net cash flows, related to the
above proved oil and gas reserves, is calculated in accordance with the
requirements of SFAS 69. Estimated future cash inflows from production are
computed by applying year-end prices for oil and gas to year-end quantities of
estimated net proved reserves. Future price changes are limited to those
provided by contractual arrangements in existence at the end of each reporting
year. Future development and production costs are those estimated future
expenditures necessary to develop and produce year-end estimated proved
reserves based on year-end cost indices, assuming continuation of year-end
economic conditions. Estimated future income taxes are calculated by applying
appropriate year-end statutory tax rates. These rates reflect allowable
deductions and tax credits and are applied to estimated future pre-tax net
cash flows, less the tax basis of related assets. Discounted future net cash
flows are calculated using 10 percent midperiod discount factors. This
discounting requires a year-by-year estimate of when the future expenditures
will be incurred and when the reserves will be produced.
The information provided does not represent management's estimate of the
company's expected future cash flows or value of proved oil and gas reserves.
Estimates of proved reserve quantities are imprecise and change over time as
new information becomes available. Moreover, probable and possible reserves,
which may become proved in the future, are excluded from the calculations. The
arbitrary valuation prescribed under SFAS 69 requires assumptions as to the
timing of future production from proved reserves and the timing and amount of
future development and production costs. The calculations are made as of
December 31 each year and should not be relied upon as an indication of the
company's future cash flows or value of its oil and gas reserves.
FS-34
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES - Continued
Unaudited
TABLE V - STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED
TO PROVED OIL AND GAS RESERVES - Continued
CONSOLIDATED COMPANIES AFFILIATED COMPANIES
--------------------------------------------- --------------------
MILLIONS OF DOLLARS U.S. AFRICA OTHER TOTAL CPI TCO WORLDWIDE
- ---------------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1994
Future cash inflows from production $26,030 $12,230 $12,450 $50,710 $ 9,160 $14,080 $73,950
Future production and development costs (13,540) (4,060) (5,450) (23,050) (6,050) (8,020) (37,120)
Future income taxes (3,950) (5,000) (2,410) (11,360) (1,570) (2,090) (15,020)
- ---------------------------------------------------------------------------------------------------------------------------------
Undiscounted future net cash flows 8,540 3,170 4,590 16,300 1,540 3,970 21,810
10 percent midyear annual discount for
timing of estimated cash flows (3,490) (1,220) (1,870) (6,580) (660) (2,950) (10,190)
- ---------------------------------------------------------------------------------------------------------------------------------
STANDARDIZED MEASURE OF DISCOUNTED
FUTURE NET CASH FLOWS $ 5,050 $ 1,950 $ 2,720 $ 9,720 $ 880 $ 1,020 $11,620
=================================================================================================================================
AT DECEMBER 31, 1993
Future cash inflows from production $24,990 $8,680 $10,590 $44,260 $ 8,490 $11,170 $63,920
Future production and development costs (13,510) (3,640) (4,740) (21,890) (5,660) (8,240) (35,790)
Future income taxes (3,490) (3,020) (1,660) (8,170) (1,380) (900) (10,450)
- ---------------------------------------------------------------------------------------------------------------------------------
Undiscounted future net cash flows 7,990 2,020 4,190 14,200 1,450 2,030 17,680
10 percent midyear annual discount for
timing of estimated cash flows (3,400) (700) (1,500) (5,600) (650) (1,690) (7,940)
- ---------------------------------------------------------------------------------------------------------------------------------
Standardized Measure of Discounted
Future Net Cash Flows $ 4,590 $ 1,320 $ 2,690 $ 8,600 $ 800 $ 340 $ 9,740
=================================================================================================================================
AT DECEMBER 31, 1992
Future cash inflows from production $32,820 $10,770 $13,910 $57,500 $10,820 $ - $68,320
Future production and development costs (15,240) (2,280) (5,670) (23,190) (6,870) - (30,060)
Future income taxes (5,420) (4,020) (2,420) (11,860) (2,010) - (13,870)
- ---------------------------------------------------------------------------------------------------------------------------------
Undiscounted future net cash flows 12,160 4,470 5,820 22,450 1,940 - 24,390
10 percent midyear annual discount for
timing of estimated cash flows (5,450) (1,560) (2,700) (9,710) (930) - (10,640)
- ---------------------------------------------------------------------------------------------------------------------------------
Standardized Measure of Discounted
Future Net Cash Flows $ 6,710 $ 2,910 $ 3,120 $12,740 $ 1,010 $ - $13,750
=================================================================================================================================
TABLE VI - CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE
NET CASH FLOWS FROM PROVED RESERVES
CONSOLIDATED COMPANIES AFFILIATED COMPANIES WORLDWIDE
---------------------------- ---------------------------- ----------------------------
MILLIONS OF DOLLARS 1994 1993 1992 1994 1993 1992 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
PRESENT VALUE AT JANUARY 1 $ 8,600 $12,740 $10,300 $1,140 $1,010 $1,110 $ 9,740 $13,750 $11,410
- ---------------------------------------------------------------------------------------------------------------------------------
Sales and transfers of oil and gas
produced, net of production costs (3,933) (4,294) (4,538) (392) (346) (385) (4,325) (4,640) (4,923)
Development costs incurred 1,195 1,280 1,354 313 171 171 1,508 1,451 1,525
Purchases of reserves 305 30 89 - 436 - 305 466 89
Sales of reserves (54) (72) (1,723) - - - (54) (72) (1,723)
Extensions, discoveries and improved
recovery, less related costs 1,775 922 912 (3) 5 810 1,772 927 1,722
Revisions of previous quantity estimates 1,064 1,210 1,217 (377) 560 (817) 687 1,770 400
Net changes in prices, development
and production costs 1,317 (6,602) 2,633 1,384 (1,123) (401) 2,701 (7,725) 2,232
Accretion of discount 1,233 1,775 1,641 206 205 239 1,439 1,980 1,880
Net change in income tax (1,782) 1,611 855 (371) 222 283 (2,153) 1,833 1,138
- ---------------------------------------------------------------------------------------------------------------------------------
Net change for the year 1,120 (4,140) 2,440 760 130 (100) 1,880 (4,010) 2,340
- ---------------------------------------------------------------------------------------------------------------------------------
PRESENT VALUE AT DECEMBER 31 $ 9,720 $ 8,600 $12,740 $1,900 $1,140 $1,010 $11,620 $ 9,740 $13,750
=================================================================================================================================
The changes in present values between years, which can be significant, reflect
changes in estimated proved reserve quantities and prices and assumptions used
in forecasting production volumes and costs. Changes in the timing of
production are included with "Revisions of previous quantity estimates." The
increase for 1994 reflected higher crude oil prices and natural gas reserve
quantity increases, partially offset by lower natural gas prices. The decline
from 1992 to 1993 was due primarily to lower crude oil prices.
FS-35
FIVE-YEAR FINANCIAL SUMMARY (1)
MILLIONS OF DOLLARS, EXCEPT PER-SHARE AMOUNTS 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME DATA
REVENUES
Sales and other operating revenues
Refined products $14,328 $16,089 $16,821 $16,794 $19,385
Crude oil 8,249 8,501 10,031 10,276 11,303
Natural gas 2,138 2,156 1,995 1,869 2,056
Natural gas liquids 1,180 1,235 1,190 1,165 1,305
Other petroleum 944 967 927 812 769
Chemicals 3,065 2,708 2,872 3,098 3,325
Coal and other minerals 416 447 397 427 443
Excise taxes 4,790 4,068 3,964 3,659 2,933
Corporate and other 20 20 15 18 21
- ------------------------------------------------------------------------------------------------------------------------
Total sales and other operating revenues 35,130 36,191 38,212 38,118 41,540
Equity in net income of affiliated companies 440 440 406 491 371
Other income 284 451 1,059 334 655
- ------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 35,854 37,082 39,677 38,943 42,566
COSTS, OTHER DEDUCTIONS AND INCOME TAXES 34,161 35,817 37,467 37,650 40,409
- ------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $ 1,693 $ 1,265 $ 2,210 $ 1,293 $ 2,157
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES - - (641) - -
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 1,693 $ 1,265 $ 1,569 $ 1,293 $ 2,157
========================================================================================================================
PER SHARE OF COMMON STOCK:
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGES IN ACCOUNTING PRINCIPLES $2.60 $1.94 $3.26 $1.85 $3.05
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES - - (0.95) - -
========================================================================================================================
NET INCOME (LOSS) PER SHARE OF COMMON STOCK $2.60 $1.94 $2.31 $1.85 $3.05
========================================================================================================================
CASH DIVIDENDS PER SHARE $1.85 $1.75 $1.65 $1.625 $1.475
========================================================================================================================
CONSOLIDATED BALANCE SHEET DATA (YEAR-END)
Current assets $ 7,591 $ 8,682 $ 8,722 $ 9,031 $10,089
Properties, plant and equipment (net) 22,173 21,865 22,188 22,850 22,726
Total assets 34,407 34,736 33,970 34,636 35,089
Short-term debt 4,014 3,456 2,888 1,706 59
Other current liabilities 5,378 7,150 6,947 7,774 8,958
Long-term debt and capital lease obligations 4,128 4,082 4,953 5,991 6,710
Stockholders' equity 14,596 13,997 13,728 14,739 14,836
Per share $22.40 $21.49 $21.11 $21.25 $21.15
========================================================================================================================
SELECTED DATA
Return on average stockholders' equity 11.8% 9.1% 11.0% 8.7% 15.0%
Return on average capital employed 8.7% 6.8% 8.5% 7.5% 11.9%
Total debt/total debt plus equity 35.8% 35.0% 36.4% 34.3% 31.3%
Capital and exploratory expenditures (2) $4,819 $4,440 $4,423 $4,787 $4,269
Common stock price - High $49 3/16 $49 3/8 $37 11/16 $40 1/16 $40 13/16
Common stock price - Low $39 7/8 $33 11/16 $30 1/16 $31 3/4 $31 9/16
Common stock price - Year-end $44 5/8 $43 9/16 $34 3/4 $34 1/2 $36 5/16
Common shares outstanding at year-end (in thousands) 651,751 651,478 650,348 693,444 701,600
Weighted average shares outstanding
for the year (in thousands) 651,672 650,958 677,955 700,348 706,926
Number of employees at year-end 45,758 47,576 49,245 55,123 54,208
========================================================================================================================
(1) COMPARABILITY BETWEEN YEARS IS AFFECTED BY CHANGES IN ACCOUNTING METHODS:1992 AND SUBSEQUENT YEARS REFLECT ADOPTION
OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 106, "EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS
OTHER THAN PENSIONS" AND SFAS NO. 109, "ACCOUNTING FOR INCOME TAXES"; 1990 THROUGH 1991 REFLECT THE ADOPTION OF
SFAS NO. 96, "ACCOUNTING FOR INCOME TAXES." SHARE AND PER-SHARE AMOUNTS FOR ALL YEARS REFLECT THE TWO-FOR-ONE STOCK
SPLIT IN MAY 1994.
(2) INCLUDES EQUITY IN AFFILIATES' EXPENDITURES. $846 $701 $621 $498 $433
FS-36
