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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): April 23, 1999
Chevron Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-368-2 94-0890210
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer No.)
of incorporation )
575 Market Street, San Francisco, CA 94105
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(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 April 22, 1999 Chevron Corporation issued a press release announcing
first quarter 1999 Net Income of $329 million.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release of Chevron Corporation dated April
22, 1999, entitled "Chevron reports first quarter 1999
Net Income of $329 million."
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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: April 23, 1999
CHEVRON CORPORATION
By /s/ L. I. BEEBE
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L. I. Beebe
Secretary
Exhibit 99.1
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Chevron Corporation
Public Affairs
P. O. Box 7753
San Francisco, CA 94120-7753
Phone 415 894 4246
NEWS
FOR RELEASE AT 6:00 AM PDT
APRIL 22, 1999
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CHEVRON REPORTS FIRST QUARTER 1999 NET INCOME OF $329 MILLION
* Average U.S. crude oil and natural gas realizations declined by about
20 percent from the 1998 first quarter.
* International liquids production increased by 8 percent from the 1998
first quarter to 809,000 barrels per day.
* First quarter 1999 international natural gas production rose 29
percent, reflecting new production from the Britannia Field in the
United Kingdom.
SAN FRANCISCO, April 22 -- Chevron Corp. today reported first quarter net income
of $329 million ($0.50 per share-diluted), a decrease of 35 percent from 1998
first quarter net income of $507 million ($0.77 per share-diluted). Net income
for 1999 benefited from net special items of $48 million, compared with net
benefits of $71 million in last year's first quarter. In the 1999 first quarter,
a gain from the sale of the company's interest in a coal mining affiliate was
partially offset by net environmental remediation provisions for the company's
U.S. operations.
Chairman and CEO Ken Derr commented, "Disappointing earnings in the first
quarter were the result of severely depressed crude oil, natural gas and
commodity chemical prices. We have been operating in this difficult price
environment for more than a year now. Although the recent upward trend in crude
oil and natural gas prices has been very encouraging, the improvement came too
late to bolster our first quarter earnings.
"Our average U.S. crude oil sales realization per barrel in the first quarter
1999 fell 20 percent, compared with the 1998 first quarter, to just under $10,"
Derr said. "At the same time, our average U.S. natural gas realization declined
22 percent to $1.63 per thousand cubic feet."
Derr noted that West Texas Intermediate (WTI) benchmark crude prices have risen
recently by more than $6 per barrel from their low point in mid-February of this
year. The benchmark Henry Hub natural gas spot price has risen to about $2.10
per thousand cubic feet in the third week of April, up over 40 cents from its
low in early March.
"The growth of international liquids production continues to be a bright spot
for us, helping to mitigate the effect of depressed prices," Derr said. "During
the first quarter 1999, net international liquids production was up about 8
percent from the first quarter of last year to 809,000 barrels per day. New
production from the Britannia Field in the U.K North Sea contributed to a 29
percent increase in the company's international natural gas production.
"Our U.S. refining, marketing and transportation first quarter operating results
improved compared with last year, mainly reflecting higher sales margins and
higher refined products sales volumes. The margins benefited from less downtime
and lower expenses from planned maintenance at our refineries than the first
quarter 1998," Derr added. "Total U.S. refined
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products sales volumes were nearly 5 percent above first quarter 1998 levels,
led by a 9 percent increase in our branded motor gasoline sales. However, our
international downstream earnings, after excluding foreign currency effects,
declined in the 1999 quarter, mainly in our Caltex and international shipping
operations."
"Although we are pleased with the recent improvement in crude oil and natural
gas prices," Derr commented, "we remain focused on efforts across the company to
significantly reduce our cost structure for the long-term. Compared with the
1998 first quarter, we reduced operating and exploration expenses by
approximately $80 million -- a positive first step in removing $500 million from
our overall cost structure."
Derr said that the company announced several consolidations and reorganizations
that are expected to be completed later in 1999 and will likewise result in
increased efficiencies and lower costs. These include relocation of the
headquarters of chemicals and pipeline operations to Houston, Texas, from the
San Francisco Bay Area; closing of the La Habra, Calif., research facility and
relocation of these research activities to other company locations;
reorganizations of the company's San Joaquin Valley, Permian Basin and Gulf of
Mexico Shelf exploration and production operations; and consolidation of the
company's Australia and Papua New Guinea strategic business units.
"Details of additional restructuring plans that are under way in many of our
operating areas will be finalized over the coming months. We will continue to
move decisively on many fronts to sustain our long-term cost competitiveness,"
Derr said.
Derr summarized some of the company's noteworthy operating activities since the
beginning of 1999:
* The acquisitions of Rutherford-Moran Oil Corp. and another interest in
Block B8/32 offshore Thailand were completed in late March. These
purchases provide Chevron with an entry into the Southeast Asian gas
market through a 52 percent interest in Block B8/32. The company will
also become operator of the Block on Oct. 1, 1999.
* In January, Chevron and its partners celebrated first crude oil
production from the Huizhou 32-5 Field, located in the Pearl River
Mouth Basin of the South China Sea. Production from this field is
expected to reach 27,000 barrels a day and, when combined with
production from other fields, will help Chevron become the largest
offshore crude oil producer in China.
* Production began in January from Genesis, the company's first
deepwater project in the Gulf of Mexico. Production is anticipated to
reach 50,000 barrels per day of oil and equivalent gas by year-end
1999, with peak production expected to reach 67,000 barrels per day by
2002.
* Chevron Chemical Co. began commercial production from its new fuel and
lubricating oil additives manufacturing plant in Singapore. Increased
sales volumes are expected in the second quarter after using most of
the first quarter 1999 production to build plant inventories, as
product qualification moved to completion.
Total revenues for the quarter were $6.7 billion, a decrease of 12 percent from
$7.6 billion in last year's first quarter. The decline was primarily
attributable to lower average sales realizations from refined products, crude
oil, and natural gas.
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Foreign currency effects reduced net income by $9 million and $46 million in the
first quarters of 1999 and 1998, respectively. The improvement primarily
reflected lower foreign currency losses from the company's Caltex affiliate
operations in Korea, Thailand and the Philippines.
Exploration and Production
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U.S. exploration and production net income was $47 million in the first quarter
1999, down from $106 million in the 1998 first quarter on lower crude and
natural gas prices. Included in 1999 earnings were gains of $13 million from
U.S. producing property sales.
The company's average 1999 U.S. crude oil realizations of $9.97 per barrel and
natural gas realizations of $1.63 per thousand cubic feet declined by 20 percent
and 22 percent, respectively, compared with the first quarter 1998. Net U.S.
liquids production decreased to 306,000 barrels per day from 336,000 barrels per
day in the prior-year first quarter. Net U.S. natural gas production of 1.7
billion cubic feet per day declined from 1.8 billion cubic feet per day in the
1998 quarter. The drop in liquids and natural gas production was primarily
attributable to field declines and prior-year property sales.
International exploration and production net income was $116 million, down from
$133 million in the 1998 first quarter. Net income for the 1998 quarter included
a net charge of $24 million from special items. The decline in earnings
reflected lower crude oil prices, offset partially by higher liftings when
compared with the year-ago quarter.
Net international liquids production increased 63,000 barrels per day to 809,000
barrels per day, mainly due to increased production in Angola, Indonesia and
Kazakhstan. These increases were partially offset by declines in Australia and
Nigeria. Natural gas production increased 29 percent to 832 million cubic feet
per day, primarily reflecting higher volumes from the Britannia Field in the
United Kingdom, which began operation in August 1998.
Foreign currency losses in the first quarter 1999 were $16 million compared with
losses of $15 million in the 1998 quarter. Losses in both years occurred
primarily in the company's Australian, Canadian and U.K. operations.
Refining, Marketing and Transportation
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U.S. refining, marketing and transportation 1999 net income was $82 million
compared with $45 million in the first quarter 1998. Earnings included special
charges of $15 million and $5 million from environmental remediation provisions
in the 1999 and 1998 periods, respectively.
Earnings for 1999 were up over last year, primarily reflecting higher sales
margins that benefited from less downtime and lower expenses from major
scheduled maintenance at two of the company's refineries. Refined products sales
volumes increased between periods. Earnings in the first quarter 1999 also
included a loss of $13 million associated with the insurance deductible and
other third-party claims from the March 1999 fire at the company's Richmond,
Calif., refinery. Excluding the effects of certain crude oil pricing
adjustments, sales margins strengthened late in the first quarter and remained
strong early into the second quarter.
Total refined product sales volumes were 1.19 million barrels per day in 1999,
up about 5 percent from the comparable quarter last year. Most refined products
sales volumes increased, including branded motor gasoline sales volumes, which
rose by 9 percent to 525,000 barrels per day. The increase in branded motor
gasoline sales volumes primarily reflects the acquisition of new accounts and
the construction of new stations during 1998. Additionally, first quarter 1998
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sales volumes were hampered by poor weather, which reduced travel and demand for
motor gasoline.
International refining, marketing and transportation net income was $87 million,
up from $76 million reported for the first quarter of 1998. Results for the
first quarter 1998 included a special charge of $25 million for the company's
share of the cumulative effect from Caltex's adoption of a new accounting
standard for the costs of start-up activities.
After excluding foreign currency effects, earnings for Caltex operations,
particularly Korea and Japan, declined despite increased sales volumes. This
drop in earnings was mainly due to lower refined products sales margins caused
by competitive price discounting. The Asia-Pacific market continues to
experience reduced demand for refined products, along with surplus manufacturing
capacity. The company's international shipping results also declined as freight
rates fell.
Sales volumes increased by 13 percent in the first quarter of 1999 to 910,000
barrels per day, primarily in the Caltex areas of operation.
Net income included foreign currency gains of $5 million in the first quarter
1999, compared with losses of $31 million in the 1998 first quarter. Caltex's
operations in Korea, Thailand and the Philippines were primarily responsible for
the favorable foreign currency swings.
Chemicals
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Chemicals net income was $50 million in the 1999 quarter, compared with
$63 million in last year's first quarter. Higher sales volumes, primarily
resulting from a business acquisition in 1998, were offset by lower sales
margins for many of the company's chemical products, as product prices declined
faster than feedstock costs.
All Other
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All Other incurred net charges of $53 million in the first quarter 1999,
compared with net benefits of $84 million in the comparable prior-year quarter.
Results for 1999 included a gain of $60 million from the sale of the company's
equity interest in a coal mining affiliate, while 1998 results included net
benefits from a favorable prior-years' tax adjustment of $125 million.
Excluding special items, earnings from the company's coal operations improved to
$19 million in 1999, compared with $11 million in 1998. Depreciation of the
company's coal assets was discontinued in the second half of 1998 when the
business was offered for sale.
Net charges, excluding special items, from other activities were $132 million in
1999, compared with $52 million in 1998. Increased charges in 1999 included
interest expense on higher debt levels, corporate tax and other adjustments and
costs associated with legal and other claims.
Capital and Exploratory Expenditures
------------------------------------
Capital and exploratory expenditures, including the company's share of
affiliates' expenditures, were $1.425 billion in the 1999 first quarter,
compared with $0.972 billion in the first quarter 1998. Expenditures for
international exploration and production projects were $860 million or 60
percent of total expenditures, reflecting the company's continued emphasis on
increasing international oil and gas production. The first quarter 1999 included
$489 million attributable to the acquisition of a 52 percent interest in Block
B8/32 offshore Thailand.
# # #
4/22/99
CHEVRON CORPORATION - FINANCIAL REVIEW -1-
(Millions of Dollars, Except Per-Share Amounts)
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
Three Months Ending March 31,
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REVENUES: 1999 1998 (3)
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Sales and Other Operating Revenues (1) $ 6,399 $ 7,464
Income From Equity Affiliates 144 126
Other Income 146 38
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6,689 7,628
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COSTS AND OTHER DEDUCTIONS:
Purchased Crude Oil and Products 2,781 3,635
Operating Expenses 1,160 1,206
Selling, General and Administrative Expenses 397 253
Exploration Expenses 88 101
Depreciation, Depletion and Amortization 566 554
Taxes Other Than on Income (1) 1,078 1,011
Interest and Debt Expense 105 94
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6,175 6,854
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Income Before Income Tax Expense 514 774
Income Tax Expense 185 267
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NET INCOME $ 329 $ 507
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PER-SHARE AMOUNTS
Earnings - Basic $ .50 $ .78
Earnings - Diluted $ .50 $ .77
Dividends $ .61 $ .61
Average Common Shares Outstanding (000's)
- Basic 654,677 654,871
- Diluted 657,493 657,128
NET INCOME BY MAJOR OPERATING AREA
(unaudited) Three Months Ending March 31,
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1999 1998 (3)
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Exploration and Production
United States $ 47 $ 106
International 116 133
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Total Exploration and Production 163 239
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Refining, Marketing and Transportation
United States 82 45
International 87 76
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Total Refining, Marketing and Transportation 169 121
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Chemicals 50 63
All Other (2) (53) 84
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NET INCOME $ 329 $ 507
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(1) Includes consumer excise taxes $ 912 $ 852
(2) Includes coal operations, interest expense, interest income on cash and
marketable securities, corporate center costs, and real estate and
insurance activities.
(3) Restated for the company's share of the cumulative effect of Caltex's
implementation, effective January 1, 1998, of 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 certain Canadian deferred income taxes, effective
January 1, 1998.
CHEVRON CORPORATION - FINANCIAL REVIEW -2-
(Millions of Dollars)
SPECIAL ITEMS BY MAJOR OPERATING AREA Three Months Ending March 31,
-----------------------------
(unaudited) 1999 1998 (1)
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U. S. Exploration and Production $ 3 $ -
International Exploration and Production - (24)
U. S. Refining, Marketing and Transportation (15) (5)
International Refining, Marketing and Transportation - (25)
Chemicals - -
All Other (2) 60 125
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Total Special Items $ 48 $ 71
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SUMMARY OF SPECIAL ITEMS Three Months Ending March 31,
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(unaudited) 1999 1998 (1)
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Asset Dispositions $ 60 $ (56)
Environmental Remediation Provisions (12) (5)
Prior-Year Tax adjustments - 157
Other, Net - (25)
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Total Special Items $ 48 $ 71
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FOREIGN CURRENCY LOSSES $ (9) $ (46)
EARNINGS BY MAJOR OPERATING AREA
EXCLUDING SPECIAL ITEMS
(unaudited) Three Months Ending March 31,
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1999 1998 (1)
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Exploration and Production
United States $ 44 $ 106
International 116 157
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Total Exploration and Production 160 263
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Refining, Marketing and Transportation
United States 97 50
International 87 101
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Total Refining, Marketing and Transportation 184 151
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Chemicals 50 63
All Other (2) (113) (41)
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Earnings Excluding Special Items 281 436
Special Items 48 71
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Net Income $ 329 $ 507
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(1) Restated for the company's share of the cumulative effect of Caltex's
implementation, effective January 1, 1998, of 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 certain Canadian deferred income taxes, effective
January 1, 1998.
(2) Includes coal operations, interest expense, interest income on cash and
marketable securities, corporate center costs, and real estate and
insurance activities.
CHEVRON CORPORATION - FINANCIAL REVIEW -3-
(MILLIONS OF DOLLARS)
CONSOLIDATED BALANCE SHEET March 31, December 31,
1999 1998
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(unaudited)
ASSETS:
Cash and Cash Equivalents $ 538 $ 569
Other Current Assets 5,921 5,728
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Total Current Assets 6,459 6,297
Investments and Advances 4,794 4,604
Properties, Plant and Equipment-Net 24,399 23,729
Other 2,114 1,910
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TOTAL ASSETS $ 37,766 $ 36,540
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LIABILITIES:
Short-Term Debt $ 3,795 $ 3,165
Other Current Liabilities 4,196 4,001
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Total Current Liabilities 7,991 7,166
Long-Term Debt and Capital Lease Obligations 4,338 4,393
Noncurrent Deferred Income Taxes 3,923 3,645
Reserves For Employee Benefit Plans 1,763 1,742
Deferred Credits and Other Noncurrent Obligations 2,561 2,560
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TOTAL LIABILITIES 20,576 19,506
STOCKHOLDERS' EQUITY 17,190 17,034
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 37,766 $ 36,540
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CONSOLIDATED STATEMENT OF CASH FLOWS Three Months Ending March 31,
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(unaudited) 1999 1998
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OPERATING ACTIVITIES
Net Income $ 329 $ 507
Adjustments
Depreciation, depletion and amortization 566 554
Dry hole expense related to prior years' expenditures 19 22
Distributions less than equity in affiliates' income (102) (74)
Net before-tax (gains) losses on asset retirements and sales (108) 8
Net currency translation gains 15 16
Net decrease (increase) in operating working capital 90 (760)
Deferred income tax provision 60 132
Other (78) (28)
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Net cash provided by operating activities 791 377
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INVESTING ACTIVITIES
Capital expenditures (797) (730)
Proceeds from asset sales 145 12
Other investing cash flows (22) (57)
Net (purchases) sales of marketable securities (102) 153
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Net cash used for investing activities (776) (622)
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FINANCING ACTIVITIES
Net borrowings of short-term obligations 484 1,059
Proceeds from issuance of long-term debt 12 9
Repayments of long-term debt and other financing obligations (214) (7)
Cash dividends paid (399) (399)
Net Sales (Purchases) of treasury shares 70 (164)
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Net cash used for financing activities (47) 498
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EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS 1 (3)
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NET CHANGE IN CASH AND CASH EQUIVALENTS (31) 250
CASH AND CASH EQUIVALENTS AT JANUARY 1, 1999 AND 1998 569 1,015
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CASH AND CASH EQUIVALENTS AT MARCH 31, 1999 AND 1998 $ 538 $ 1,265
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CHEVRON CORPORATION - FINANCIAL REVIEW -4-
CAPITAL AND EXPLORATORY EXPENDITURES (1) Three Months Ending March 31,
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(millions of dollars) 1999 1998
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United States
Exploration and Production $ 253 $ 274
Refining, Marketing and Transportation 113 100
Chemicals 101 42
Other 20 36
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Total United States 487 452
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International
Exploration and Production 860 422
Refining, Marketing and Transportation 53 72
Chemicals 25 22
Other - 4
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Total International 938 520
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Worldwide $ 1,425 $ 972
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OPERATING STATISTICS (1)
NET LIQUIDS PRODUCTION (MB/D):
United States 306 336
International 809 746
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Worldwide 1,115 1,082
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NET NATURAL GAS PRODUCTION (MMCF/D):
United States 1,676 1,808
International 832 644
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Worldwide 2,508 2,452
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SALES OF NATURAL GAS (MMCF/D):
United States 3,359 3,497
International 1,908 1,329
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Worldwide 5,267 4,826
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SALES OF NATURAL GAS LIQUIDS (MB/D):
United States 146 141
International 52 56
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Worldwide 198 197
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SALES OF REFINED PRODUCTS (MB/D):
United States 1,188 1,133
International 910 809
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Worldwide 2,098 1,942
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REFINERY INPUT (MB/D):
United States 924 757
International 494 491
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Worldwide 1,418 1,248
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CHEMICALS SALES & OTHER OPERATING
REVENUES (millions of dollars) (2)
United States $ 627 $ 681
International 177 145
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Worldwide $ 804 $ 826
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(1) Includes interest in affiliates.
(2) Includes sales to other Chevron companies.