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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-368-2
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CHEVRON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0890210
- ------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
225 Bush Street, San Francisco, California 94104
- ------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 894-7700
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NONE
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares of each of the issuer's classes of common
stock, as of the latest practicable date:
Class Outstanding as of March 31, 1995
----------------------------- ------------------------------------
Common stock, $1.50 par value 651,978,238
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INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income for the three months
ended March 31, 1995 and 1994 2
Consolidated Balance Sheet at March 31, 1995 and
December 31, 1994 3
Consolidated Statement of Cash Flows for the three
months ended March 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Listing of Exhibits and Reports on Form 8-K 15
Signature 15
- 1 -
PART I. FINANCIAL INFORMATION
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED
MARCH 31,
-------------------
Millions of Dollars, Except Per Share Amounts 1995 1994
- -----------------------------------------------------------------------------
REVENUES
Sales and other operating revenues * $ 8,820 $ 8,105
Equity in net income of affiliated companies 231 107
Other income, net (7) 52
-------------------
TOTAL REVENUES 9,044 8,264
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COSTS AND OTHER DEDUCTIONS
Purchased crude oil and products 4,518 3,684
Operating expenses 1,365 1,497
Exploration expenses 71 105
Selling, general and administrative expenses 301 308
Depreciation, depletion and amortization 576 592
Taxes other than on income * 1,373 1,345
Interest and debt expense 110 73
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TOTAL COSTS AND OTHER DEDUCTIONS 8,314 7,604
-------------------
INCOME BEFORE INCOME TAX EXPENSE 730 660
INCOME TAX EXPENSE 271 272
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NET INCOME $ 459 $ 388
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PER SHARE OF COMMON STOCK:
NET INCOME $ .70 $ .60
DIVIDENDS $ .4625 $ .4625
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING (000s) 651,895 651,625
* Includes consumer excise taxes $1,185 $ 1,152
See accompanying notes to consolidated financial statements.
- 2 -
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, DECEMBER 31,
Millions of Dollars 1995 1994
- -----------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 608 $ 413
Marketable securities 642 893
Accounts and notes receivable 3,957 3,923
Inventories:
Crude oil and petroleum products 597 1,036
Chemicals 391 391
Materials and supplies 261 263
Other merchandise 26 20
-----------------------
1,275 1,710
Prepaid expenses and other current assets 766 652
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TOTAL CURRENT ASSETS 7,248 7,591
Long-term receivables 138 138
Investments and advances 4,252 3,991
Properties, plant and equipment, at cost 47,240 46,810
Less: accumulated depreciation, depletion
and amortization 25,044 24,637
-----------------------
22,196 22,173
Deferred charges and other assets 510 514
-----------------------
TOTAL ASSETS $34,344 $34,407
-----------------------
- ------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $ 4,205 $ 4,014
Accounts payable 2,696 2,990
Accrued liabilities 1,107 1,274
Federal and other taxes on income 474 624
Other taxes payable 516 490
-----------------------
TOTAL CURRENT LIABILITIES 8,998 9,392
Long-term debt and capital lease obligations 4,080 4,128
Deferred credits and other non-current obligations 2,028 2,043
Non-current deferred income taxes 2,742 2,674
Reserves for employee benefit plans 1,570 1,574
-----------------------
TOTAL LIABILITIES 19,418 19,811
-----------------------
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 1,859 1,858
Deferred compensation - Employee Stock
Ownership Plan (ESOP) (850) (900)
Currency translation adjustment and other 283 175
Retained earnings 14,622 14,457
Treasury stock, at cost (shares 60,508,830
and 60,736,435 at March 31, 1995 and
December 31, 1994, respectively) (2,057) (2,063)
-----------------------
TOTAL STOCKHOLDERS' EQUITY 14,926 14,596
-----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $34,344 $34,407
-----------------------
See accompanying notes to consolidated financial statements.
- 3 -
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31,
-----------------------
Millions of Dollars 1995 1994
- -----------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 459 $ 388
Adjustments
Depreciation, depletion and amortization 576 592
Dry hole expense related to prior years'
expenditures 5 24
Distributions less than equity in affiliates'
income (145) (59)
Net before-tax losses (gains) on asset
retirements and sales 15 (12)
Net currency translation losses (gains) 31 (2)
Deferred income tax provision 82 65
Net increase in operating working capital (436) (514)
Other (23) 18
-----------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 564 500
-----------------------
INVESTING ACTIVITIES
Capital expenditures (732) (669)
Proceeds from asset sales 243 71
Net sales of marketable securities 257 1
-----------------------
NET CASH USED FOR INVESTING ACTIVITIES (232) (597)
-----------------------
FINANCING ACTIVITIES
Net borrowings of short-term obligations 191 319
Proceeds from issuance of long-term debt 17 2
Repayments of long-term debt and other
financing obligations (44) (367)
Cash dividends paid (301) (301)
Purchases of treasury shares (2) (2)
-----------------------
NET CASH USED FOR FINANCING ACTIVITIES (139) (349)
-----------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 2 3
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NET CHANGE IN CASH AND CASH EQUIVALENTS 195 (443)
CASH AND CASH EQUIVALENTS AT JANUARY 1 413 1,644
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CASH AND CASH EQUIVALENTS AT MARCH 31 $ 608 $1,201
-----------------------
See accompanying notes to consolidated financial statements.
- 4 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Chevron Corporation and
its subsidiaries (the company) have not been audited by independent
accountants, except for the balance sheet at December 31, 1994. In the
opinion of the company's management, the interim data include all adjustments
necessary for a fair statement of the results for the interim periods. These
adjustments were of a normal recurring nature.
Certain notes and other information have been condensed or omitted from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
Therefore, these financial statements should be read in conjunction with the
company's 1994 Annual Report on Form 10-K.
The results for the first quarter of 1995 are not necessarily indicative of
future financial results.
NOTE 2. NET INCOME
Net income for the first quarter of 1995 benefited from $63 million in special
items, which included a net $80 million earnings benefit primarily from a gain
related to the sale of land by a Caltex affiliate. This gain was offset by a
$10 million environmental remediation provision related to marketing
properties formerly held by the company and a $7 million charge for employee
severance in connection with a work force reduction program at the company's
Canadian operations.
Net income for the first quarter of 1994 included special charges of $36
million. These charges included provisions of $21 million for estimated
environmental assessment and cleanup liabilities at certain U.S. refining and
marketing facilities and $15 million for a reserve adjustment related to the
resolution of certain regulatory issues with the Minerals Management Service.
Foreign exchange gains and losses netted to zero in the 1995 and 1994 first
quarters.
NOTE 3. INFORMATION RELATING TO THE STATEMENT OF CASH FLOWS
"Net increase in operating working capital" is composed of the following:
THREE MONTHS ENDED
MARCH 31,
----------------------
Millions of Dollars 1995 1994
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Increase in accounts and notes receivable $ (36) $ (22)
Decrease in inventories 162 7
Increase in prepaid expenses
and other current assets (88) (24)
Decrease in accounts payable and
accrued liabilities (351) (475)
Decrease in income and other taxes payable (123) -
------------------------------------------------------------------------
Net increase in operating working capital $ (436) $ (514)
------------------------------------------------------------------------
"Net Cash Provided by Operating Activities" includes the following cash
payments for interest on debt and for income taxes:
THREE MONTHS ENDED
MARCH 31,
----------------------
Millions of Dollars 1995 1994
------------------------------------------------------------------------
Interest paid on debt (net of
capitalized interest) $ 107 $ 86
Income taxes paid $ 336 $ 224
------------------------------------------------------------------------
- 5 -
The "Net sales of marketable securities" consists of the following gross
amounts:
THREE MONTHS ENDED
MARCH 31,
----------------------
Millions of Dollars 1995 1994
------------------------------------------------------------------------
Marketable securities purchased $ (567) $ (339)
Marketable securities sold 824 340
------------------------------------------------------------------------
Net sales of marketable securities $ 257 $ 1
------------------------------------------------------------------------
The Consolidated Statement of Cash Flows excludes the following non-cash
transactions:
The company's Employee Stock Ownership Plan (ESOP) repaid $50 million and $40
million of matured debt guaranteed by Chevron Corporation in January of 1995
and 1994, respectively. These payments were recorded by the company as a
reduction in its debt outstanding and in Deferred Compensation - ESOP.
In February 1994, the company took delivery of a new tanker, the Chevron
Employee Pride, under a capital lease arrangement. This asset was recorded as
a $65 million addition to properties, plant and equipment and to capital lease
obligations.
NOTE 4. SUMMARIZED FINANCIAL DATA - CHEVRON U.S.A. INC.
Chevron U.S.A. Inc. is Chevron Corporation's principal operating company,
consisting primarily of the company's United States 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:
THREE MONTHS ENDED
MARCH 31,
----------------------
Millions of Dollars 1995 1994
- ----------------------------------------------------------------------------
Sales and other operating revenues $5,933 $6,082
Costs and other deductions 6,043 5,861
Net (loss) income (33) 173
- ----------------------------------------------------------------------------
MARCH 31, December 31,
Millions of Dollars 1995 1994
- ----------------------------------------------------------------------------
Current assets $ 2,877 $ 3,341
Other assets 14,597 14,136
Current liabilities 6,040 6,347
Other liabilities 5,526 5,599
Net worth 5,908 5,531
- ----------------------------------------------------------------------------
NOTE 5. SUMMARIZED FINANCIAL DATA - CHEVRON TRANSPORT CORPORATION
Chevron Transport Corporation (CTC), a Liberian corporation, is an indirect,
wholly-owned subsidiary of Chevron Corporation. CTC is the principal operator
of Chevron's international tanker fleet and is engaged in the marine
transportation of oil and refined petroleum products. Most of CTC's shipping
revenue is derived by providing transportation services to other Chevron
companies. Chevron Corporation has guaranteed this subsidiary's obligations in
connection with certain debt securities where CTC is deemed to be an issuer.
- 6 -
In accordance with the Securities and Exchange Commission's disclosure
requirements, summarized financial information for CTC and its consolidated
subsidiaries (Chevron Tankers (Bermuda) Limited, Chevron Manning Services
Limited and Chevron Product Carriers Corporation) is presented below. This
summarized financial data was derived from the financial statements prepared
on a stand alone basis in conformity with generally accepted accounting
principles.
THREE MONTHS ENDED
MARCH 31,
----------------------
Millions of Dollars 1995 1994
- ----------------------------------------------------------------------------
Sales and other operating revenues $105 $110
Costs and other deductions 117 128
Net (loss) income (20) (12)
- ----------------------------------------------------------------------------
MARCH 31, December 31,
Millions of Dollars 1995 1994
- ----------------------------------------------------------------------------
Current assets $ 35 $ 75
Other assets 939 851
Current liabilities 485 404
Other liabilities 194 208
Net worth 295 314
- ----------------------------------------------------------------------------
Separate financial statements and other disclosures with respect to CTC are
omitted as such separate financial statements and other disclosures are not
material to investors in the debt securities deemed issued by CTC. There were
no restrictions on CTC's ability to pay dividends or make loans or advances at
March 31, 1995.
NOTE 6. SUMMARIZED FINANCIAL DATA - CALTEX GROUP OF COMPANIES
Summarized financial information for the Caltex Group of Companies, owned 50
percent by Chevron and 50 percent by Texaco Inc., is as follows (amounts
reported are on a 100 percent Caltex Group basis):
THREE MONTHS ENDED
MARCH 31,
----------------------
Millions of Dollars 1995 1994
- ----------------------------------------------------------------------------
Sales and other operating revenues $4,651 $3,298
Operating income 257 245
Net income 416 178
- ----------------------------------------------------------------------------
In the first quarter of 1995, Caltex recorded a net gain for U.S. financial
reporting of $171 million relating to the sale of a portion of land and air
utility rights by a Caltex affiliate in Japan required for a public project.
The proceeds include compensation that will be used to remove and relocate or
replace existing assets affected by the sale.
On March 28, 1995, the merger of refining and marketing assets of Caltex
Australia Ltd (CAL), a 75 percent owned subsidiary of Caltex Petroleum
Corporation, with the refining and marketing assets of Ampol Ltd, a unit of
Pioneer International Ltd, received regulatory approval from Australia's Trade
Practices Commission. CAL and Pioneer each hold a 50 percent stake in the new
company, Australian Petroleum Pty Ltd.
NOTE 7. INCOME TAXES
The effective income tax rate was 37.1 percent for this year's first quarter,
compared with 41.2 percent for the 1994 first quarter. The rate decrease
reflects proportionately greater earnings from equity affiliates recorded on
an after-tax basis.
- 7 -
NOTE 8. CONTINGENT LIABILITIES
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.
OTHER CONTINGENCIES -
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.
The company and its subsidiaries have certain contingent liabilities with
respect to guarantees, direct or indirect, of debt of affiliated companies or
others and guarantees, claims and long-term commitments under various
agreements, the payments and future commitments for which are not material in
the aggregate to the company's liquidity or consolidated financial position.
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 DOE claims the company
overrecouped under the regulations by $167 million during the period in
question. Including interest through March 31, 1995, the total claim amounts
to $414 million. The company asserts that in fact it incurred a loss through
participation in the DOE program. Discovery has been completed and
evidentiary hearings before the DOE's Office of Hearings and Appeals were
concluded in March 1995.
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.
- 8 -
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
the Republic of Kazakhstan.
- 9 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FIRST QUARTER 1995 COMPARED WITH FIRST QUARTER 1994
OVERVIEW AND OUTLOOK
- --------------------
Net income for the 1995 first quarter was $459 million, up 18 percent from
$388 million earned in the first quarter of 1994. Earnings per share improved
to $.70 from $.60. However, special items increased 1995 reported earnings by
$63 million, but reduced 1994 earnings $36 million. Excluding these special
items, 1995 first quarter results of $396 million were 7 percent lower than
comparably adjusted 1994 results of $424 million.
All of the company's major business segments, with the exception of U.S.
refining and marketing (downstream), had strong first quarter earnings. The
chemicals business posted a record quarter, international exploration and
production (upstream) results were at near record levels and U.S. upstream
maintained its strong performance despite low natural gas prices. However,
very weak industry margins in the U.S. downstream segment, particularly on the
Gulf Coast, were aggravated by significant refinery downtime associated with
major turnarounds at two core refineries, as well as some unscheduled
downtime. Higher maintenance costs were incurred and significantly lower
refinery utilization required more costly product purchases to supply the
company's U.S. marketing system.
The company continues to benefit from cost reduction programs as total ongoing
operating and administrative expenses were down, despite the higher refinery
maintenance costs. Also the sales of the Philadelphia and Port Arthur
refineries have lowered the company's cost structure.
Crude oil prices increased gradually during the quarter and continued to
strengthen in April. Also, natural gas prices began a modest upturn in April
from their very low first quarter levels. In March, the company's average
posted price for West Texas Intermediate crude oil (WTI), a benchmark crude,
was $17.50 per barrel; in April its WTI average price was $18.85. The Henry
Hub, Louisiana spot price for natural gas, a common benchmark for natural gas
prices, averaged $1.52 per thousand cubic feet in March; in April the average
rose slightly to $1.59. Refined product prices and refinery margins also
showed some improvement in April, and the company's refinery utilization rates
increased to more normal levels.
Total revenues for the quarter were $9.0 billion, up 9 percent from $8.3
billion in last year's first quarter. Higher prices for crude oil, refined
products and chemicals more than offset lower refined product sales volumes
and natural gas prices.
Taxes on income for the first quarter of 1995 were $271 million compared with
$272 million in last year's first quarter; however, the 1995 effective tax
rate decreased to 37.1 percent from 41.2 percent for the 1994 first quarter.
The decrease in 1995's effective tax rate is directly proportional to the
increase in equity affiliates' after-tax earnings included in the company's
before-tax income.
Foreign currency exchange effects netted to zero in the 1995 and 1994 first
quarters.
CURRENT DEVELOPMENTS
- --------------------
In February 1995, the company completed the sale of its 185,000 barrels per
day Port Arthur, Texas refinery. Provisions for the loss on the sale were
included in the company's 1993 and 1994 earnings. This sale followed the sale
in August 1994 of the company's 175,000 barrels per day refinery in
Philadelphia, Pennsylvania. The company has reserved for known environmental
obligations retained under the sales terms for these refineries.
- 10 -
The sales were part of a restructuring reflecting 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. Sales of unbranded and bulk
refined products, usually to other petroleum companies, have declined, and the
company has entered into purchase arrangements to supply its marketing areas
formerly served by the Port Arthur refinery.
Reformulated gasoline (RFG) was federally mandated in nine metropolitan areas
of the United States, beginning January 1, 1995. In addition, areas in 14
states voluntarily opted into the RFG requirement. Chevron is selling RFG in
a total of nine mandated and voluntary areas, accounting for about 22 percent
of its total gasoline sales volumes in the first quarter. Some voluntary
areas subsequently opted out of the requirement, which caused an oversupply of
reformulated gasolines in the marketplace. This oversupply prevented the
complete recovery of the increased manufacturing costs for RFG. The company is
unable to predict when the RFG market will come into a supply and demand
balance.
In March 1995, the company announced the discovery of a major natural gas
field off the coast of Australia. The new discovery is estimated to hold in
excess of 2 trillion cubic feet of gas and 70 million barrels of condensate,
and lies between two giant gas and condensate fields that feed the North West
Shelf project in which the company holds a 16.7 percent interest.
The company awarded contracts totaling $320 million in March 1995 to begin
construction at its 40 percent owned Escravos Gas Project in Nigeria, which it
will operate. The project will gather and process gas reserves from two
offshore fields, where gas produced in association with crude oil is being
flared. The contract cover the first phase of the project, expected to be
completed in 1997, which will result in the processing of about 170 million
cubic feet of gas per day. Subsequent phases not included in these contracts
are in the early stages of planning and will target gas from other oil fields
in the Escravos area, where total gas reserves are in excess of 17 trillion
cubic feet.
Also in March, Chevron announced the possible sale of its real estate
subsidiaries and affiliates, assuming satisfactory prices and terms can be
obtained. All the properties being marketed are in California. The real
estate operations are not a part of the company's core businesses and may be
more valuable to someone else.
Chevron announced in April 1995 a restructuring of its Canadian oil and gas
operations including a plan to sell some of its non-strategic oil and gas
properties. About 20 percent, or 200 fewer employees will be needed in the
new organization. The company recorded a special provision of $7 million
after tax in the first quarter for employee severance and other costs of the
reorganization.
The company continues to review and analyze its operations and may incur
future charges related to these and other future restructurings of its
businesses and disposition of marginal or non-strategic assets.
The company and the Republic of Kazakhstan formally announced in April 1995
the completion of the first phase of their $20 billion, 40 year partnership
to develop the Tengiz oil field. With the completion of phase one, Tengiz has
a processing capacity of 90,000 barrels per day and the ability to rapidly
expand to 130,000 barrels per day. A newly constructed demercaptanization
plant was commissioned to remove the sulfur compounds from the Tengiz crude as
required for shipment through the Russian pipeline system. Chevron's cash
investment in the project at March 31, 1995 was $712 million. The pace of
further capital spending and development is dependent on the availability of
additional export capability.
Current 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 had discussions related to the Caspian Pipeline
Consortium, composed of the Republics of Russia and Kazakhstan and the
Sultanate of Oman, regarding terms for an export pipeline system that would
enable the project to sell its output directly to world markets. There have
been no recent developments in those discussions.
- 11 -
REVIEW OF OPERATIONS
- --------------------
The following tables detail the company's after-tax earnings by major
operating area and selected operating data.
EARNINGS BY MAJOR OPERATING AREA
FIRST QUARTER,
-----------------
(Millions of Dollars) 1995 1994
- ---------------------------------------------------------------------
Exploration and Production
United States $150 $124
International 172 111
- ---------------------------------------------------------------------
Total Exploration and Production 322 235
- ---------------------------------------------------------------------
Refining, Marketing and Transportation
United States (102) 98
International 156 63
- ---------------------------------------------------------------------
Total Refining, Marketing and Transportation 54 161
- ---------------------------------------------------------------------
Total Petroleum Operations 376 396
Chemicals 163 26
Coal and Other Minerals 12 15
Corporate and Other (92) (49)
- ---------------------------------------------------------------------
Net Income $459 $388
- ---------------------------------------------------------------------
SELECTED OPERATING DATA
FIRST QUARTER,
-----------------
(Millions of Dollars) 1995 1994
- ---------------------------------------------------------------------
U.S. EXPLORATION AND PRODUCTION
Net Crude Oil and Natural Gas
Liquids Production (MBPD) 356 373
Net Natural Gas Production (MMCFPD) 1,935 2,189
Sales of Natural Gas Liquids (MBPD) 248 210
Revenue from Net Production
Crude Oil ($/Bbl.) $15.11 $11.56
Natural Gas ($/MCF) $ 1.45 $ 2.13
INTERNATIONAL EXPLORATION AND PRODUCTION (1)
Net Crude Oil and Natural Gas
Liquids Production (MBPD) 648 603
Net Natural Gas Production (MMCFPD) 592 531
Revenue from Liftings
Liquids ($/Bbl.) $16.03 $13.12
Natural Gas ($/MCF) $ 1.81 $ 2.03
U.S. REFINING, MARKETING AND TRANSPORTATION
Sales of Gasoline (MBPD) 547 644
Sales of Other Refined Products (MBPD) 551 665
Refinery Input (MBPD) 909 1,153
Average Refined Product Sales Price ($/Bbl.) $25.22 $22.71
INTERNATIONAL REFINING, MARKETING AND TRANSPORTATION (1)
Sales of Refined Products (MBPD) 984 945
Refinery Input (MBPD) 616 639
CHEMICAL SALES AND OTHER OPERATING REVENUES (2)
United States $873 $597
International 152 128
------ -------
Worldwide $1,025 $725
- ---------------------------------------------------------------------
(1) Includes equity in affiliates.
(2) Millions of dollars. Includes Sales to Other Chevron Companies.
1994 amounts restated to conform with 1995 presentation.
---------------
MBPD=thousand barrels per day; MMCFPD=million cubic feet per day;
Bbl.=barrel; MCF=thousand cubic feet
- 12 -
WORLDWIDE EXPLORATION AND PRODUCTION operations earned $322 million in the
first quarter of 1995, up 37 percent from $235 million in the 1994 first
quarter. U.S. EXPLORATION AND PRODUCTION activities earned $150 million,
compared with $124 million earned in the 1994 first quarter, which included a
$15 million special charge for the resolution of a regulatory issue.
Excluding the effects of last year's special charge, earnings increased 8
percent in 1995.
Operationally, the effects of lower natural gas prices and lower production
volumes were offset by the benefit of higher crude oil prices, strong natural
gas liquids sales and lower operating expenses. Additionally, depreciation
expense declined, reflecting lower production volumes, and exploration expense
was down because of lower well write-offs.
Average crude oil realizations of $15.11 per barrel were up $3.55 from $11.56
in the 1994 first quarter, but average natural gas prices of $1.45 per
thousand cubic feet were down $.68 from $2.13 in the same prior year period.
Net liquids production declined 5 percent to 356,000 barrels per day due to
normal field declines. Net natural gas production declined 12 percent to 1.9
billion cubic feet per day due to normal field declines and production
curtailments caused by weak demand.
INTERNATIONAL EXPLORATION AND PRODUCTION net earnings for the first quarter
were $172 million, a strong increase over the $111 million earned in the
prior year first quarter. Results for 1995 included a special charge of $7
million for employee severance in connection with a work force reduction
program at the company's Canadian operations.
The earnings increase reflected higher crude oil prices and higher crude oil
and natural gas production volumes. Crude oil prices were up nearly $3.00 per
barrel to $16.03 in 1995, but natural gas prices declined about $.20 per
thousand cubic feet to $1.81. Net liquids production volumes increased 7
percent to 648,000 barrels per day, with higher volumes in Angola, the North
Sea and Kazakhstan. Natural gas production increased 11 percent to 592
million cubic feet per day, primarily due to higher volumes in Canada.
Foreign exchange losses were $3 million, compared with gains of $4 million in
the prior year quarter.
WORLDWIDE REFINING AND MARKETING had net earnings of $54 million in the first
quarter of 1995 compared with earnings of $161 million in last year's first
quarter. U.S. REFINING AND MARKETING had a net loss of $102 million in the
first quarter compared with net earnings of $98 million in the 1994 first
quarter. Both quarters' results included special charges for environmental
remediation - $10 million in 1995 and $21 million in 1994.
Very weak industry fundamentals coupled with refinery turnarounds at two of
the company's core refineries led to the net loss. The average refined
product sales price was $25.22 in the 1995 first quarter, up from $22.71 last
year; however, prices did not fully recover increased crude oil costs,
slashing margins. Although both quarters experienced refinery downtime for
maintenance, 1995 results included higher maintenance costs and significantly
lower refinery utilization, which required more costly third-party product
purchases to supply the company's marketing system. Also, market conditions
have prevented the recovery of increased manufacturing costs of reformulated
gasolines, which comprised about 22 percent of the company's gasoline sales
volumes.
Total refined product sales volumes of 1.1 million barrels per day fell 16
percent from the 1994 first quarter, although sales through the company's
retail marketing system were maintained at about the same level. Lower fuels
production, primarily due to the sales of the Philadelphia refinery in August
1994 and the Port Arthur refinery in late February this year, curtailed
unbranded bulk sales.
INTERNATIONAL REFINING AND MARKETING net earnings increased to $156 million
from $63 million in last year's first quarter; however, 1995 earnings
benefited a net $80 million from special items, principally a gain related to
the sale of land by a Caltex affiliate in Japan. Excluding special items,
higher Caltex results were more than
- 13 -
offset by lower earnings in Canada and the United Kingdom. Foreign exchange
gains were $21 million, mostly Caltex related, compared with $1 million of
foreign exchange gains in the prior year quarter. Sales volumes increased
4 percent to almost 1.0 million barrels per day, primarily in the Caltex
areas of operations.
CHEMICALS posted record quarterly earnings of $163 million, up from $26
million in the first quarter of 1994, as strong industry-wide demand
continued. The company achieved record production and sales volumes, and
prices for major products were strong.
The major earnings improvement occurred in the olefins operations, which
benefited from increased sales volumes and higher prices for ethylene and
polyethylenes. In addition, aromatics operations benefited from strong demand
and prices for styrene and benzene.
The company's restructurings in recent years to concentrate on its core
petrochemicals business and cost reduction initiatives have positioned it to
improve its competitive performance during the current cycle of strong
industry fundamentals.
CORPORATE AND OTHER includes interest expense, interest income on cash and
marketable securities, corporate cost centers and real estate and insurance
operations. These activities incurred net charges of $92 million in 1995's
first quarter compared with charges of $49 million in the comparable prior
year quarter. Foreign exchange losses were $13 million in the 1995 quarter
compared with $2 million in 1994's comparable period. The remaining increase
was primarily due to increased interest expense, resulting from higher average
debt levels and higher interest rates.
CAPITAL AND LIQUIDITY
- ---------------------
Cash and cash equivalents totaled $608 million at March 31, 1995, up $195
million from year-end 1994 levels. Cash from operations, proceeds from asset
sales and proceeds from sales of marketable securities were used to fund the
company's capital expenditures and dividend payments to stockholders.
Total debt and capital lease obligations of $8.285 billion at March 31, 1995,
were up $143 million from $8.142 billion at year-end 1994. The increase was
primarily from net short-term borrowings, largely the issuance of commercial
paper, partially offset by the scheduled January 1995 retirement of $50
million in 6.51 percent U.S. public debt.
Although the company benefits from lower interest rates on short-term debt,
the large amount of short-term debt has kept Chevron's ratio of current assets
to current liabilities at the relatively low level of .81 at March 31, 1995.
The company's short-term debt, consisting of commercial paper and current
portion of long-term debt, totaled $6.0 billion at March 31, 1995. This
amount includes $1.8 billion that was reclassified as long-term since the
company has both the intent and ability, as evidenced by revolving credit
agreements, to refinance it on a long-term basis. The company's practice has
been to continually refinance its commercial paper, maintaining levels it
believes to be appropriate.
The company's debt ratio (total debt to total debt plus equity) was 35.7
percent at March 31, 1995, about level with year-end 1994. The company
continually monitors its spending levels, market conditions and related
interest rates to maintain what it perceives to be reasonable debt levels.
Worldwide capital and exploratory expenditures for the first quarter of 1995,
including the company's share of affiliates' expenditures, totaled $987
million, a 7 percent decrease from the $1.059 billion spent in the 1994 first
quarter. Expenditures for exploration and production activities represented
63 percent of total outlays in the 1995 period, up from 61 percent in the 1994
first quarter. Expenditures outside the United States were 62 percent of the
total outlays for both periods.
- 14 -
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In re Gulf Pension Litigation--
The description contained in Part I, Item 3, Paragraph B of the
company's Annual Report on Form 10-K for the year ended December 31,
1994 is hereby amended as follows:
On April 17, 1995, the United States Supreme Court denied the
plaintiff's Petition for a Writ of Certiorari.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(4) Pursuant to the Instructions to Exhibits, certain instruments
defining the rights of holders of long-term debt securities of the
corporation and its consolidated subsidiaries are not filed because
the total amount of securities authorized under any such instrument
does not exceed 10 percent of the total assets of the corporation
and its subsidiaries on a consolidated basis. A copy of any such
instrument will be furnished to the Commission upon request.
(12) Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
None.
SIGNATURE
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 thereunto duly authorized.
CHEVRON CORPORATION
----------------------------
(Registrant)
Date May 11, 1995 /S/ DONALD G. HENDERSON
---------------------- ------------------------------
Donald G. Henderson,
Vice-President & Comptroller
(Principal Accounting Office
and Duly Authorized Officer)
- 15 -
EXHIBIT 12
CHEVRON CORPORATION - TOTAL ENTERPRISE BASIS
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ------------------------------------------
1995 1994 1993 1992 1991 1990
------------- ------ ------- ------- ------- -------
Net Income before
Cumulative Effect of
Changes in Accounting
Principles (1) $459 $1,693 $1,265 $2,210 $1,293 $2,157
Income Tax Expense 336 1,322 1,389 1,508 1,302 2,387
Distributions Greater
Than (Less Than) Equity
in Earnings of Less
Than 50% Owned
Affiliates 3 (3) 6 (9) (20) (6)
Minority Interest - 3 (2) 2 2 6
Previously Capitalized
Interest Charged to
Earnings During Period 8 32 20 18 17 15
Interest and Debt Expense 149 453 390 490 585 707
Interest Portion of
Rentals (2) 37 156 169 152 153 163
------- ------- ------- ------- ------- -------
EARNINGS BEFORE PROVISION
FOR TAXES AND
FIXED CHARGES $992 $3,656 $3,237 $4,371 $3,332 $5,429
======= ======= ======= ======= ======= =======
Interest and Debt Expense $149 $ 453 $ 390 $ 490 $ 585 $ 707
Interest Portion of
Rentals(2) 37 156 169 152 153 163
Capitalized Interest 32 80 60 46 30 24
------- ------- ------- ------- ------- -------
TOTAL FIXED CHARGES $218 $ 689 $ 619 $ 688 $ 768 $ 894
======= ======= ======= ======= ======= =======
- -------------------------------------------------------------------------------
RATIO OF EARNINGS
TO FIXED CHARGES 4.55 5.31 5.23 6.35 4.34 6.07
- -------------------------------------------------------------------------------
(1) The information for 1992 and subsequent periods reflects the company's
adoption of the Financial Accounting Standards Board Statements No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions"
and No. 109, "Accounting for Income Taxes," effective January 1, 1992.
(2) Calculated as one-third of rentals.