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UNITED STATES 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): January 26, 1999
Chevron Corporation
-------------------
(Exact name of registrant as specified in its charter)
Delaware 1-368-2 94-0890210
--------------------------- ---------------------- -------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer No.)
of incorporation )
575 Market Street, San Francisco, CA 94105
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 894-7700
NONE
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(Former name or former address, if changed since last report)
Item 5. Other Events.
On January 25, 1999, Chevron Corporation issued a press release
announcing preliminary, unaudited earnings for the year ending December
31, 1998.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release of Chevron Corporation dated January 25,
1999, entitled "Chevron Reports 1998 Net Income of
$1.976 Billion"
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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 hereunto duly authorized.
Dated: January 26, 1999
CHEVRON CORPORATION
By /s/ S. J. CROWE
---------------------------------
S. J. Crowe, Comptroller
(Duly Authorized Officer)
EXHIBIT 99.1
------------
Chevron Corporation
Public Affairs
P. O. Box 7753
San Francisco, CA 94120-7753
Phone 415 894 4246
News
For Release at 6:00 AM PST
January 25, 1999
----------------------------
Chevron Reports 1998 Net Income of $1.976 Billion
o Fourth quarter 1998 net income of $431 million declined 51 percent, while
operating earnings of $503 million were down 38 percent
o Net income of $1.976 billion for 1998 declined 39 percent, compared with
1997's record level of $3.256 billion
o Average U.S. crude oil realizations for 1998 declined 35 percent to $11.42
per barrel
o Average U.S. natural gas realizations for 1998 declined 17 percent to $2.02
per thousand cubic feet
o International liquids production increased for the ninth consecutive year
up 7 percent during 1998 and 14 percent in the fourth quarter
o Operating expenses for 1998 declined by $600 million
o Worldwide net oil and gas reserve additions exceeded production for the
sixth consecutive year
o Annual dividends increased for the eleventh consecutive year
San Francisco, Jan. 25 - Chevron Corporation today reported 1998 preliminary
net income of $1.976 billion ($3.01 per share - diluted), down 39 percent from
1997 net income of $3.256 billion ($4.95 per share - diluted). Net income for
1998 and 1997 included net benefits of $31 million and $76 million,
respectively, from special items.
For the fourth quarter 1998, net income of $431 million ($.66 per share -
diluted) included net charges of $72 million from special items. Charges
associated with asset write-downs; reserves for environmental remediation and a
litigation issue; and last-in, first-out (LIFO) inventory adjustments were
partially offset by favorable prior-year tax adjustments and a gain from an
asset sale. Fourth quarter 1997 net income included net benefits from special
items totaling $68 million.
Excluding special items, operating earnings for 1998 were $1.945 billion
($2.96 per share), down 39 percent from operating earnings of $3.180 billion
($4.83 per share) in 1997. Fourth quarter 1998 operating earnings of $503
million ($.76 per share) decreased 38 percent.
Foreign currency effects had a major impact on the company's earnings in
1998 and 1997. Foreign currency losses included in 1998 net income were $57
million, compared with gains of $246 million in 1997. For the fourth quarter of
1998, foreign currency losses were $81 million, compared with currency gains of
$205 million in the 1997 fourth quarter. The most significant changes occurred
in areas of operations for Caltex, a 50-percent owned affiliate. Also included
in fourth quarter 1998 operating earnings were net benefits of about $115
million associated with the finalization of the year
1997 income tax returns. These benefits are primarily reflected in the results
of the international exploration and production ($60 million), chemicals ($25
million) and corporate ($30 million) operations.
Earnings Summary Fourth Quarter Year
- ---------------- ------------------ --------------------
$ Millions 1998 1997 1998 1997
------ ------ -------- -------
Operating Earnings $503 $807 $1,945 $3,180
Special Items (72) 68 31 76
------ ------ ------- --------
Net Income $431 $875 $1,976 $3,256
====== ====== ======= ========
Chairman and CEO Ken Derr said, "Our results for the fourth quarter and
full year 1998 reflected very depressed crude oil, natural gas and commodity
chemical prices. U.S. crude oil realizations fell 35 percent to $11.42 per
barrel, the lowest yearly average in 12 years, while U.S. natural gas prices
dropped 17 percent to $2.02 per thousand cubic feet. Chemical prices eroded
through the year, resulting in a falloff in operating earnings for our chemicals
business, especially in the second half of 1998."
Derr added, "Our U.S. refining and marketing business posted strong profits
for the second straight year on higher refined product sales volumes and lower
operating expenses. Some of the major challenges faced by our U.S. refining and
marketing business in 1998 included declining refined product margins and the
shutdown of our Pascagoula, Mississippi, refinery for most of the fourth quarter
for repairs of damages from Hurricane Georges." Derr said he believes the strong
performance of the U.S. refining and marketing business will be sustained
through increased sales volumes and additional operating efficiencies. He also
noted that the international refining and marketing operations of Chevron's
Caltex affiliate continued to suffer from the Asian economic downturn.
"We have focused on developing our many excellent international exploration
and production opportunities, which we believe will be our growth engine for the
long-term," Derr continued. "Our international crude oil production increased,
for the ninth consecutive year, by 7 percent to 782,000 barrels per day in 1998,
mitigating some of the effects of the poor price environment. The 1998
production represents a 67 percent increase since 1989, the last year
international production declined. We will maintain our investment strategy
through these difficult times by continuing to develop international upstream
projects and by minimizing capital spending by our international chemicals and
downstream businesses."
Derr commented, "These strategies taken together position Chevron for a
strong rebound in profitability when the eventual improvement begins in crude
oil and natural gas prices. Our employees continued to make significant strides
in cost reductions during 1998. During this past year, operating expenses,
excluding special items, declined by about $600 million, which included
approximately $200 million from our exit from the U.K. refining and marketing
business. Since 1991, we have removed about $2.4 billion from our operating cost
structure, and we plan to realize additional cost savings of more than $500
million in 1999. To successfully weather the business conditions of low crude
oil, natural gas and commodity chemicals prices, we have to continue to find
ways to minimize the cost of operating our businesses, while selectively
investing in areas that offer the greatest growth opportunities."
Derr highlighted a number of significant 1998 operating and strategic
events for the company. These included:
-2-
o Worldwide Liquids Production. Worldwide net liquids production increased by
3 percent (international production increased 7 percent) to 1.107 million
barrels per day (BPD), reflecting increased production from operations in
Kazakhstan, Indonesia, offshore eastern Canada and West Africa.
o Worldwide Reserves Replacement. Chevron's 1998 worldwide net proved barrels
of oil and equivalent gas (OEG) reserves additions exceeded production for
the sixth consecutive year. The worldwide net proved OEG reserves
replacement was about 109 percent for 1998, excluding sales and
acquisitions.
o Caspian Sea Region. Total liquids production from the Tengiz field in 1998
averaged 188,000 BPD, an increase of 21 percent over 1997 average
production of 155,000 BPD. Production in December 1998 averaged 218,000
BPD. Local government approvals were secured in December 1998 and
construction will begin in 1999 on the Caspian Pipeline Consortium's
pipeline that will deliver crude oil from the Tengiz Field in Kazakhstan to
the Black Sea port of Novorossiysk.
o West Africa Exploration and Production. During 1998, Chevron made its
third and fourth commercial discoveries in deepwater Angola Block 14,
where first production is expected later in 1999. The four discoveries
in Block 14 have an estimated 3 billion barrels of potential reserves.
Production in Block 0 in Angola, in which Chevron has a 39 percent
interest, reached a record 510,000 BPD in 1998. New production
commenced during the year at the South Nemba and Lomba fields in Angola
and from the Dibi, Ewan, Gbokoda and Opolo oil fields in Nigeria.
o Other International Exploration and Production. The company signed
agreements to explore in Qatar and Bahrain during the first quarter of
1998. In the same quarter, production began at the Moran and Gobe
fields in Papua New Guinea. New production commenced in August 1998 at
the Britannia gas and condensate field in the U.K. North Sea. In
December, Chevron announced it had executed a purchase agreement with
Rutherford-Moran Oil Corporation, which owns a 46 percent interest in
Block B8/32 in the Gulf of Thailand. While not yet finalized, this
entry into Southeast Asia may lead to other attractive investments in
the area.
o Deepwater Gulf of Mexico. Chevron acquired 66 additional deepwater
tracts at federal lease sales during the year, furthering its intent to
be a major participant in the development of the Gulf's deep waters.
The company's deepwater inventory consisted of 428 tracts at year-end
1998. Construction and installation of production facilities at the
company's first deepwater Gulf of Mexico operation, Genesis, neared
completion. Chevron is the unit operator with a 57 percent working
interest in Genesis and expects production to commence in February
1999. Another of the company's deepwater projects, Gemini, is expected
to begin production later in 1999.
Total revenues in 1998 were $30.6 billion, down 27 percent from $42.0
billion in 1997. Fourth quarter revenues of $7.3 billion were 29 percent lower
than 1997 fourth quarter revenues of $10.3 billion. Revenues for the year
declined on lower crude oil, natural gas and refined product prices. These
factors were mitigated partially by increased U.S. refined product sales
volumes. The company's exit from the U.K. refining and marketing business in the
fourth quarter 1997 caused
-3-
approximately 27 percent of the annual decrease and about 22 percent of the
quarterly decrease in total revenues.
Exploration and Production
--------------------------
U.S. Exploration and Production
- -------------------------------
$ Millions Fourth Quarter Year
----------------- -----------------
1998 1997 1998 1997
----- ----- ------ -----
Operating Earnings $106 $268 $381 $ 972
Special Items (34) (3) (16) 29
----- ----- ------ ------
Net Income $ 72 $265 $365 $1,001
===== ===== ====== ======
U.S. exploration and production operating earnings declined for the year
and fourth quarter, mainly due to lower crude oil and natural gas production and
sales realizations. Partially offsetting the earnings declines in both periods
were lower operating and exploration expenses. Operating earnings in the fourth
quarter 1998 also benefited by approximately $30 million, primarily from
aggregate net gains from a number of property sales.
For the year, the company's average crude oil realization of $11.42 per
barrel was $6.26, or 35 percent, lower than the $17.68 averaged for 1997. In the
fourth quarter, average realizations were $10.45, down $6.81 or 39 percent from
$17.26 per barrel in the prior-year quarter. Average natural gas prices
decreased $.40 to $2.02 per thousand cubic feet (MCF) for the year and decreased
$.78 to $1.99 per MCF in the fourth quarter, from comparable 1997 periods.
Net liquids production for the year averaged 325,000 BPD, down from 343,000
BPD in 1997. Fourth quarter 1998 production averaged 306,000 BPD, down 37,000
BPD compared with the prior-year fourth quarter. Net natural gas production in
1998 averaged 1.739 billion cubic feet per day, down about 6 percent from 1997.
For the 1998 fourth quarter, natural gas production averaged 1.661 billion cubic
feet per day, down from 1.779 billion in the year-earlier quarter. The declines
in liquids and natural gas production primarily reflect normal field declines,
lost production from the September 1998 storms in the Gulf of Mexico and
property sales.
Special items in the fourth quarter 1998 included charges for asset
write-downs and other charges associated with the company's planned exit from
offshore California upstream activities and a provision for litigation issues.
These were partially offset by a net gain from a producing property sale and a
benefit from reversals of certain environmental remediation reserves. Net income
for the year also included a gain from the sale of an additional producing
property earlier in the year.
International Exploration and Production
- ----------------------------------------
$ Millions Fourth Quarter Year
----------------- ------------------
1998 1997 1998 1997
----- ----- ----- ------
Operating Earnings $209 $265 $717 $1,197
Special Items (7) (4) (10) 55
----- ----- ----- ------
Net Income $202 $261 $707 $1,252
===== ===== ===== ======
International exploration and production earnings declined in 1998 as a
result of depressed crude oil prices, although international production
increased during the year and fourth quarter compared with the prior-year
periods. For the year 1998, net liquids production increased 7 percent to
782,000
-4-
BPD. Fourth quarter 1998 liquids production was 849,000 BPD, up 14 percent,
compared with the 1997 quarter. Operations in Kazakhstan, offshore eastern
Canada, Indonesia, Angola and Congo were the principal sources of the annual and
quarterly increases. Net natural gas production increased about 14 percent for
the year to 654 million cubic feet (MMCF) per day in 1998 and about 37 percent
to 774 MMCF per day in the 1998 fourth quarter. Net natural gas production
increases for the year and quarter occurred in the United Kingdom, due to the
August 1998 start-up of production at the Britannia field, as well as in
Indonesia and Nigeria. Partially offsetting these increases were production
declines in western Canada.
For the ninth consecutive year, net production and proved reserves
increased, reflecting the company's success in growing its international
upstream operations. In 1998, the company estimated it replaced 149 percent of
its international oil and gas production through additions to proved reserves.
Further production increases are expected in 1999 as new developments come
on-stream in West Africa and from production increases at the Tengiz field in
Kazakhstan.
Special items for the 1998 fourth quarter income included charges for asset
write-downs and from LIFO valuation losses, partially offset by favorable
prior-year tax adjustments. For the year, net income also included a special
charge for the deferred tax effects from the exchange of international
exploration and production properties and additional favorable prior-year tax
adjustments. Included in these prior-year tax adjustments is a favorable
cumulative effect of $32 million from the change in accounting for Canadian
deferred income taxes, effective January 1, 1998. The company restated first
quarter 1998 earnings for the cumulative effect of this change.
Earnings for the year 1998 included net foreign currency gains of $29
million, compared with gains of $77 million for the year 1997. Earnings for the
fourth quarter 1998 included foreign currency losses of $2 million, compared
with gains of $43 million for the 1997 period. These items primarily reflected
currency rate swings of the U.S. dollar relative to the Australian dollar.
Refining, Marketing and Transportation
--------------------------------------
U.S. Refining, Marketing and Transportation
- -------------------------------------------
$ Millions Fourth Quarter Year
------------------ ------------------
1998 1997 1998 1997
----- ----- ----- -----
Operating Earnings $162 $174 $633 $662
Special Items (48) (18) (61) (61)
----- ----- ----- -----
Net Income $114 $156 $572 $601
===== ===== ===== =====
Operating earnings for U.S. refining, marketing and transportation in 1998
declined slightly after a strong year in 1997. Declines in refined product
margins and the effects on earnings of Hurricane Georges were partially offset
by decreases in operating expenses and increases in refined products sales
volumes.
Refined product sales volumes increased by 4 percent to 1,243,000 BPD in
1998; fourth quarter 1998 volumes also increased by 4 percent to 1,212,000 BPD.
Most of the increases in the 1998 periods reflected higher gasoline sales
volumes, including branded gasoline sales, which were up 7 percent and 5 percent
for the quarter and full year, respectively.
For 1998, U.S. refined product sales realizations declined $6.56, or 23
percent, to $22.37 per barrel. Fourth quarter realizations declined about 25
percent compared with the 1997 quarter.
-5-
Fourth quarter 1998 net income included special charges arising from the
write-down for transportation facilities related to the company's planned exit
from offshore California production operations and provisions for environmental
remediations. Special items for the year 1998 included additional provisions for
environmental remediation.
International Refining, Marketing, and Transportation
- -----------------------------------------------------
$ Millions Fourth Quarter Year
----------------- -----------------
1998 1997 1998 1997
----- ----- ----- -----
Operating (Losses) Earnings $ (91) $133 $123 $367
Special Items (27) 6 (95) (69)
----- ----- ----- -----
Net (Loss) Income $(118) $139 $ 28 $298
===== ===== ===== =====
International refining, marketing and transportation operational earnings
decreased significantly for the fourth quarter and year 1998 relative to the
comparable 1997 periods. Operational earnings included foreign currency losses
of $80 million and $82 million for the year 1998 and fourth quarter 1998,
respectively. The comparable 1997 periods included foreign currency gains of
$169 million and $166 million, respectively. Operating earnings in the fourth
quarter also included a charge of about $40 million for Caltex inventory
adjustments.
Operating results for Caltex included foreign currency losses of $79
million for the year and $78 million for the quarter, compared with foreign
currency gains of $177 million and $158 million for the respective 1997 periods.
The most significant changes occurred in operations of Caltex's Korean and
Japanese affiliates. Caltex's operating earnings improved slightly for the year
1998 over 1997, due to stronger earnings in Korea, while operating earnings in
the fourth quarter of both years were about the same. This comparison excludes
the effects of foreign currency gains or losses in both years and higher
aggregate charges in 1997 for inventory adjustments and provisions for
uncollectible accounts receivable in Asia.
During the fourth quarter 1997, the company withdrew from the U.K. refining
and marketing business. Excluding the 1997 sales volumes from this discontinued
business, refined product sales volumes for the year were essentially flat at
784,000 BPD. For the fourth quarter 1998, sales volumes declined by 6 percent to
765,000 BPD compared with sales for the same period in 1997. Declines in
international trading and Canadian refined products sales volumes were partially
offset by increases from Caltex's operations.
Earnings for international refining, marketing and transportation in the
fourth quarter 1998 included special charges from last-in, first-out (LIFO)
inventory adjustments, mostly from Caltex operations, and for an environmental
remediation reserve. For the year 1998, earnings included special charges for
the company's share of Caltex's costs of restructuring its management and
administrative functions and the associated relocation to Singapore. In
addition, net income included a charge of $25 million from Caltex's adoption,
effective January 1, 1998, of a new accounting standard -- SOP 98-5, "Reporting
on the Costs of Start-up Activities." The company restated first quarter 1998
earnings for the effect of the implementation of this new accounting standard.
-6-
Chemicals
---------
Chemicals Fourth Quarter Year
- --------- ---------------- ----------------
$ Millions 1998 1997 1998 1997
----- ----- ----- -----
Operating Earnings $ 22 $ 41 $151 $224
Special Items (24) 22 (29) 4
----- ----- ----- -----
Net (Loss) Income $ (2) $ 63 $122 $228
===== ===== ===== =====
Operating earnings for the year 1998 declined compared with 1997, as
product margins continued to decline from price decreases in response to
industry over-capacity and the effects on demand from the Asian economic crisis.
Lower earnings from equity affiliates, primarily as a result of a sale of an
equity investment in the fourth quarter 1997, also contributed to the decline in
earnings.
Fourth quarter 1998 net income included special charges for asset
write-offs and an unfavorable LIFO inventory adjustment. Special items for the
year also included an environmental remediation provision.
All Other
---------
All Other Fourth Quarter Year
- --------- --------------- ----------------
$ Millions 1998 1997 1998 1997
----- ----- ----- -----
Operating Earnings (Losses) $ 95 $(74) $(60) $(242)
Special Items 68 65 242 118
----- ----- ----- -----
Net Income (Loss) $163 $ (9) $182 $(124)
===== ===== ===== =====
Excluding special items, 1998 net charges for All Other declined to $60
million compared with net charges of $242 million in 1997. For the fourth
quarter 1998, All Other provided a net benefit of $95 million, compared with net
charges of $74 million in the fourth quarter 1997.
Operating earnings from the company's coal operations increased by $36
million and $31 million for the year 1998 and fourth quarter 1998 to $77 million
and $39 million, respectively. Sales volumes improved at most of the company's
mines. In addition, favorable adjustments of about $20 million, primarily to
depreciation expense and reserves for certain claims, occurred during the fourth
quarter of 1998. The company expects to reach an agreement on the sale of its
coal business during early 1999.
Included in the fourth quarter 1998 operating earnings for the balance of
All Other were net benefits totaling approximately $80 million, consisting
mainly of tax-related credits connected with the utilization of capital loss
benefits, various other tax-related adjustments, and the receipt of proceeds
from favorable insurance settlements, partially offset by higher interest
expenses and lower interest income.
Special items for the fourth quarter 1998 included a favorable prior-year
tax adjustment, partially offset by an environmental remediation provision. For
the year, additional prior-year tax adjustments and the proceeds from several
insurance settlements related to environmental cost recovery claims were
partially offset by charges related to the outsourcing of the company's
mainframe computer and telecommunications operations and the write-off of
certain desktop computer equipment.
-7-
Capital and Exploratory Expenditures
------------------------------------
Capital and exploratory expenditures, including the company's share of
affiliates' expenditures, were $5.314 billion for the year 1998, compared with
$5.541 billion spent in 1997. Fourth quarter expenditures were $1.499 billion
and $1.740 billion in 1998 and 1997, respectively. In 1998, exploration and
production spending totaled $3.262 billion, of which 60 percent was spent in
international areas.
The company recently announced its 1999 capital and exploratory budget of
$5.1 billion, $200 million lower than 1998 expenditures. Approximately $3.7
billion of this funding will relate to key exploration and production growth
projects, with approximately $2.6 billion earmarked for international upstream
areas.
Cautionary Statement Relevant to Forward-Looking Information
for the Purpose of "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995.
Some of the items discussed in this earnings release are forward-looking
statements relating to Chevron's operations that are based on management's
current expectations, estimates and projections about the petroleum, chemical
and other industries, in which the company operates. The statements included in
this release are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. These include
potential changes in crude oil, natural gas and other commodity prices and
potential delays or other changes in work and repairs schedule. Actual results
could differ materially from management's estimates.
********************************************************************************
Note to the reader: Net income for 1998 and special items reported for 1998
included a net benefit of $7 million from the cumulative effects from the
implementation of accounting changes, effective January 1, 1998. The company
restated its first quarter 1998 earnings to reflect these changes. Page 3 of the
attached schedules provides preliminary restated income statements and earnings
by segments for the year-to-date periods ending March 31, 1998, June 30, 1998
and September 30, 1998.
# # #
1/25/99
-8-
CHEVRON CORPORATION - FINANCIAL REVIEW -1-
(MILLIONS OF DOLLARS EXCEPT PER-SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF INCOME
(unaudited) Year Ended
Fourth Quarter December 31,
--------------------------------------------------------
REVENUES: 1998 1997 1998 (2) 1997
---------- ----------- ---------- ----------
Sales and Other Operating Revenues (1) $ 7,177 $ 9,712 $ 29,956 $ 40,583
Income from Equity Affiliates (66) 153 228 688
Other Income 184 390 386 679
---------- ----------- ---------- ----------
7,295 10,255 30,570 41,950
---------- ----------- ---------- ----------
COSTS AND OTHER DEDUCTIONS:
Purchased Crude Oil and Products 3,358 4,599 14,036 20,223
Operating Expenses 1,160 1,303 4,834 5,280
Selling and Administrative Expenses 456 496 1,352 1,533
Exploration Expenses 117 205 478 493
Depreciation, Depletion and Amortization 646 657 2,320 2,300
Taxes Other Than on Income (1) 1,128 1,512 4,424 6,307
Interest and Debt Expense 109 85 405 312
---------- ----------- ---------- ----------
6,974 8,857 27,849 36,448
---------- ----------- ---------- ----------
INCOME BEFORE INCOME TAX EXPENSE 321 1,398 2,721 5,502
Income Tax Expense (110) 523 745 2,246
---------- ----------- ---------- ----------
NET INCOME $ 431 $ 875 $ 1,976 $ 3,256
========== =========== ========== ==========
PER-SHARE AMOUNTS
Earnings - Basic $ .66 $ 1.33 $ 3.02 $ 4.97
Earnings - Diluted $ .66 $ 1.33 $ 3.01 $ 4.95
Dividends $ .61 $ .58 $ 2.44 $ 2.28
Average Common Shares Outstanding (000's)
- Basic 654,076 658,249 654,858 656,306
- Diluted 656,237 660,826 657,076 658,403
NET INCOME BY MAJOR OPERATING AREA Year Ended
(unaudited) Fourth Quarter December 31,
--------------------------------------------------------
1998 1997 1998 1997
---------- ----------- ---------- ----------
Exploration and Production
United States $ 72 $ 265 $ 365 $ 1,001
International 202 261 707 1,252
---------- ----------- ---------- ----------
Total Exploration and Production 274 526 1,072 2,253
---------- ----------- ---------- ----------
Refining, Marketing and Transportation
United States 114 156 572 601
International (118) 139 28 298
---------- ----------- ---------- ----------
Total Refining, Marketing and Transportation (4) 295 600 899
---------- ----------- ---------- ----------
Chemicals (2) 63 122 228
All Other (3) (4) 163 (9) 182 (124)
---------- ----------- ---------- ----------
NET INCOME $ 431 $ 875 $ 1,976 $ 3,256
========== =========== ========== ==========
(1) Includes consumer excise taxes $ 956 $ 1,326 $ 3,769 $ 5,574
(2) See page 3 for restatements of 1998 periods for the company's share of the
cumulative effect of Caltex's implementation, effective January 1, 1998, of
a new accounting standard - SOP 98-5, "Reporting on the Costs of Start-up
Activities" and the cumulative effect from a change in the company's method
of applying an accounting principle relating to Canadian deferred income
taxes, effective January 1, 1998.
(3) Renamed in connection with the fourth quarter 1998 implementation of SFAS
131, "Disclosures about Segments of an Enterprise and Related Information".
(4) "All Other" includes interest expense, interest income on cash and
marketable securities, corporate center costs, coal operations, real estate
and insurance activities.
CHEVRON CORPORATION - FINANCIAL REVIEW -2-
(MILLIONS OF DOLLARS)
Year Ended
SPECIAL ITEMS BY MAJOR OPERATING AREA Fourth Quarter December 31,
------------------------------------- --------------------------------------------------------
(unaudited) 1998 1997 1998 (1) 1997
--------- --------- ------------ ---------
U. S. Exploration and Production $ (34) $ (3) $ (16) $ 29
International Exploration and Production (7) (4) (10) 55
U. S. Refining, Marketing and Transportation (48) (18) (61) (61)
International Refining, Marketing and Transportation (27) 6 (95) (69)
Chemicals (24) 22 (29) 4
All Other (2) (3) 68 65 242 118
--------- --------- --------- ---------
Total Special Items $ (72) $ 68 $ 31 $ 76
========= ========= ========= =========
Year Ended
SUMMARY OF SPECIAL ITEMS Fourth Quarter December 31,
------------------------ --------------------------------------------------------
(unaudited) 1998 1997 1998 1997
--------- --------- --------- ---------
Asset Dispositions $ 29 $ 156 $ (9) $ 183
Asset Write-offs and Revaluations (91) (78) (159) (86)
Environmental Remediation Provisions (21) - (39) (35)
Prior-Year Tax Adjustments 81 54 271 152
Restructurings & Reorganizations - (60) (43) (60)
LIFO Inventory (Losses) Gains (25) 5 (25) 5
Other, Net (45) (9) 35 (83)
--------- --------- --------- ---------
Total Special Items $ (72) $ 68 $ 31 $ 76
========= ========= ========= =========
FOREIGN EXCHANGE GAINS (LOSSES) $ (81) $ 205 $ (57) $ 246
-------------------------------
EARNINGS BY MAJOR OPERATING AREA
EXCLUDING SPECIAL ITEMS
--------------------------------------------------- Year Ended
(unaudited) Fourth Quarter December 31,
--------------------------------------------------------
1998 1997 1998 1997
--------- --------- --------- ---------
Exploration and Production
United States $ 106 $ 268 $ 381 $ 972
International 209 265 717 1,197
--------- --------- --------- ---------
Total Exploration and Production 315 533 1,098 2,169
--------- --------- --------- ---------
Refining, Marketing and Transportation
United States 162 174 633 662
International (91) 133 123 367
--------- --------- --------- ---------
Total Refining, Marketing and Transportation 71 307 756 1,029
--------- --------- --------- ---------
Chemicals 22 41 151 224
All Other (2) (3) 95 (74) (60) (242)
--------- --------- --------- ---------
Earnings Excluding Special Items 503 807 1,945 3,180
Special Items (72) 68 31 76
--------- --------- --------- ---------
Net Income $ 431 $ 875 $ 1,976 $ 3,256
========= ========= ========= =========
(1) See page 3 for restatements of 1998 periods for the company's
share of the cumulative effect of Caltex's implementation,
effective January 1, 1998, of a new accounting standard - SOP
98-5, "Reporting on the Costs of Start-up Activities" and the
cumulative effect from a change in the company's method of
applying an accounting principle relating to Canadian deferred
income taxes, effective January 1, 1998.
(2) "All Other" includes interest expense, interest income on cash and
marketable securities, corporate center costs, coal operations,
real estate and insurance activities.
(3) Renamed in connection with the fourth quarter 1998 implementation
of SFAS 131, "Disclosures about Segments of an Enterprise and
Related Information".
CHEVRON CORPORATION - FINANCIAL REVIEW -3-
RESTATEMENT OF 1998 RESULTS
(MILLIONS OF DOLLARS EXCEPT PER-SHARE AMOUNTS)
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
Three Months Ended Six Months Ended Nine Months Ended
REVENUES: March 31,1998 June 30,1998 September 30,1998
------------------- ----------------- --------------------
Sales and Other Operating Revenues (1) $ 7,464 $ 15,218 $ 22,779
Income from Equity Affiliates (2) 126 281 294
Other Income 38 98 202
--------------- ----------------- ------------------
7,628 15,597 23,275
--------------- ----------------- ------------------
COSTS AND OTHER DEDUCTIONS:
Purchased Crude Oil and Products 3,635 7,184 10,678
Operating Expenses 1,206 2,561 3,674
Selling and Administrative Expenses 253 529 896
Exploration Expenses 101 235 361
Depreciation, Depletion and Amortization 554 1,111 1,674
Taxes Other Than on Income (1) 1,011 2,151 3,296
Interest and Debt Expense 94 193 296
--------------- ----------------- ------------------
6,854 13,964 20,875
--------------- ----------------- ------------------
INCOME BEFORE INCOME TAX EXPENSE 774 1,633 2,400
Income Tax Expense (3) 267 549 855
--------------- ----------------- ------------------
NET INCOME $ 507 $ 1,084 $ 1,545
=============== ================= ==================
PER-SHARE AMOUNTS
Earnings - Basic $ .78 $ 1.66 $ 2.36
Earnings - Diluted $ .77 $ 1.65 $ 2.35
Dividends $ .61 $ 1.22 $ 1.83
Average Common Shares Outstanding (000's)
- Basic 654,871 655,167 655,122
- Diluted 657,128 657,503 657,359
NET INCOME BY MAJOR OPERATING AREA (2) (3) (4)
- ----------------------------------
(unaudited) Three Months Ended Six Months Ended Nine Months Ended
March 31,1998 June 30,1998 September 30,1998
------------------- ----------------- --------------------
Exploration and Production
United States $ 106 $ 191 $ 293
International 133 344 505
--------------- ----------------- ------------------
Total Exploration and Production 239 535 798
--------------- ----------------- ------------------
Refining, Marketing and Transportation
United States 45 270 458
International 76 192 146
--------------- ----------------- ------------------
Total Refining, Marketing and Transportation 121 462 604
--------------- ----------------- ------------------
Chemicals 63 110 124
All Other (5) 84 (23) 19
--------------- ----------------- ------------------
NET INCOME $ 507 $ 1,084 $ 1,545
=============== ================= ==================
(1) Includes consumer excise taxes $ 852 $ 1,840 $ 2,813
(2) Amounts have been restated for the company's share of the cumulative
effect of Caltex's implementation, effective January 1, 1998, of a
new accounting standard - SOP 98-5, "Reporting on the Costs of
Startup Activities."
(3) Amounts have been restated for the cumulative effect from the change
in the company's method of applying an accounting principle relating
to Canadian deferred income taxes, effective January 1, 1998.
(4) Renamed in connection with the fourth quarter 1998 implementation of
SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information".
(5) "All Other" includes interest expense, interest income on cash and
marketable securities, corporate center costs, coal operations, real
estate and insurance activities.
CHEVRON CORPORATION - FINANCIAL REVIEW -4-
Year Ended
CAPITAL AND EXPLORATORY EXPENDITURES (1) Fourth Quarter December 31,
- ------------------------------------
------------------------------------------------------------
(millions of dollars) 1998 1997 1998 1997
----- ----- ----- -----
United States
Exploration and Production $ 336 $ 385 $ 1,320 $ 1,659
Refining, Marketing and Transportation 179 266 654 520
Chemicals 115 120 385 470
Other 56 65 223 140
---------- ---------- ---------- ----------
Total United States 686 836 2,582 2,789
---------- ---------- ---------- ----------
International
Exploration and Production 545 626 1,942 1,956
Refining, Marketing and Transportation 205 214 431 602
Chemicals 63 64 359 194
---------- ---------- ---------- ----------
Total International 813 904 2,732 2,752
---------- ---------- ---------- ----------
Worldwide $ 1,499 $ 1,740 $ 5,314 $ 5,541
========== ========== ========== ==========
OPERATING STATISTICS (1)
NET LIQUIDS PRODUCTION (MB/D):
United States 306 343 325 343
International 849 743 782 731
---------- ---------- ---------- ----------
Worldwide 1,155 1,086 1,107 1,074
========== ========== ========== ==========
NET NATURAL GAS PRODUCTION (MMCF/D):
United States 1,661 1,779 1,739 1,849
International 774 567 654 576
---------- ---------- ---------- ----------
Worldwide 2,435 2,346 2,393 2,425
========== ========== ========== ==========
SALES OF NATURAL GAS (2) (MMCF/D):
United States 3,039 3,625 3,275 3,400
International 1,588 1,397 1,476 1,209
---------- ---------- ---------- ----------
Worldwide 4,627 5,022 4,751 4,609
========== ========== ========== ==========
SALES OF NATURAL GAS LIQUIDS (2) (MB/D):
United States 137 144 130 133
International 36 80 52 69
---------- ---------- ---------- ----------
Worldwide 173 224 182 202
========== ========== ========== ==========
SALES OF REFINED PRODUCTS (MB/D):
United States 1,212 1,164 1,243 1,193
International 765 889 787 886
---------- ---------- ---------- ----------
Worldwide 1,977 2,053 2,030 2,079
========== ========== ========== ==========
REFINERY INPUT (MB/D):
United States 697 933 869 933
International 472 556 475 565
---------- ---------- ---------- ----------
Worldwide 1,169 1,489 1,344 1,498
========== ========== ========== ==========
CHEMICALS SALES & OTHER OPERATING
REVENUES (millions of dollars) (3)
United States $ 604 $ 742 $ 2,592 $ 3,045
International 200 155 635 588
---------- ---------- ---------- ----------
Worldwide $ 804 $ 897 $ 3,227 $ 3,633
========== ========== ========== ==========
(1) Includes interest in affiliates.
(2) Restated to include affiliate's 1997 volumes.
(3) Includes sales to other Chevron companies.
