================================================================================
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 September 30, 2000
------------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-368-2
-------
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)
575 Market Street, San Francisco, California 94105
-------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 894-7700
--------------
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 September 30, 2000
- ---------------------------------- ------------------------------------
Common stock, $.75 par value 641,816,765
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INDEX
Page No.
Cautionary Statements Relevant to Forward-Looking
Information for the Purpose of "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995 1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income for the three months
and nine months ended September 30, 2000 and 1999 2
Consolidated Statement of Comprehensive Income for
the three months and nine months ended
September 30, 2000 and 1999 2
Consolidated Balance Sheet at September 30, 2000
and December 31, 1999 3
Consolidated Statement of Cash Flows for the
nine months ended September 30, 2000 and 1999 4
Notes to Consolidated Financial Statements 5-13
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14-25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 6. Listing of Exhibits and Reports on Form 8-K 26
Signature 27
Exhibit: Computation of Ratio of Earnings to Fixed Charges 28
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR
THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This quarterly report on Form 10-Q contains forward-looking statements relating
to Chevron's operations that are based on management's current expectations,
estimates and projections about the petroleum and chemicals industries. Words
such as "expects," "intends," "plans," "projects," "believes," "estimates" and
similar expressions are used to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecast in
such forward-looking statements.
Among the factors that could cause actual results to differ materially are crude
oil and natural gas prices; refining and marketing margins; chemicals prices and
competitive conditions affecting supply and demand for the company's aromatics,
olefins and additives products; potential failure to achieve expected production
from existing and future oil and gas development projects; potential delays in
the development, construction or start-up of planned projects; potential
disruption or interruption of the company's production or manufacturing
facilities due to accidents or political events; potential liability for
remedial actions under existing or future environmental regulations and
litigation (including, regulations and litigation dealing with gasoline
composition and characteristics); and potential liability resulting from pending
or future litigation. In addition, such statements could be affected by general
domestic and international economic and political conditions. Unpredictable or
unknown factors not discussed herein also could have material adverse effects on
forward-looking statements. Chevron undertakes no obligation to update publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.
-1-
PART I. FINANCIAL INFORMATION
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
Millions of Dollars, Except Per-Share Amounts 2000 1999 2000 1999
- ---------------------------------------------------------------------------------------------------------------
Revenues
- --------
Sales and other operating revenues* $ 12,962 $ 9,965 $37,267 $24,837
Income from equity affiliates 276 127 647 404
Other income 348 85 561 366
--------------------------------------------------------
Total Revenues 13,586 10,177 38,475 25,607
--------------------------------------------------------
Costs and Other Deductions
- --------------------------
Purchased crude oil and products 6,953 5,327 20,460 12,394
Operating expenses 1,359 1,117 3,901 3,721
Selling, general and administrative expenses 399 357 1,162 1,203
Exploration expenses 98 205 317 389
Depreciation, depletion and amortization 801 767 2,151 1,966
Taxes other than on income* 1,205 1,181 3,475 3,402
Interest and debt expense 101 116 356 334
-------------------------------------------------------
Total Costs and Other Deductions 10,916 9,070 31,822 23,409
-------------------------------------------------------
Income Before Income Tax Expense 2,670 1,107 6,653 2,198
Income Tax Expense 1,139 525 2,962 937
-------------------------------------------------------
Net Income $ 1,531 $ 582 $ 3,691 $ 1,261
=======================================================
Per Share of Common Stock:
Net Income - Basic $ 2.36 $ 0.88 $ 5.66 $ 1.92
- Diluted $ 2.35 $ 0.88 $ 5.65 $ 1.91
Dividends $ 0.65 $ 0.61 $ 1.95 $ 1.83
Weighted Average Number of
Shares Outstanding (000s) - Basic 648,520 657,190 652,641 656,268
- Diluted 649,577 660,649 653,827 659,403
* Includes consumer excise taxes. $ 1,032 $ 1,023 $ 2,932 $ 2,921
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
Millions of Dollars 2000 1999 2000 1999
- ---------------------------------------------------------------------------------------------------------------
Net Income $ 1,531 $ 582 $ 3,691 $ 1,261
--------------------------------------------------------
Currency translation adjustment - (30) (3) (41)
Holding gain on securities
arising during period 55 11 59 33
Less: reclassification adjustment for gains
included in net income (99) - (99) -
--------------------------------------------------------
Net change during period (44) 11 (40) 33
Minimum pension liability adjustment - - (15) (11)
--------------------------------------------------------
Other Comprehensive Loss, net of tax (44) (19) (58) (19)
--------------------------------------------------------
Comprehensive Income $ 1,487 $ 563 $ 3,633 $ 1,242
========================================================
See accompanying notes to consolidated financial statements.
-2-
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30,
2000 December 31,
Millions of Dollars (Unaudited) 1999
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 1,342 $ 1,345
Marketable securities 1,318 687
Accounts and notes receivable 3,727 3,688
Inventories:
Crude oil and petroleum products 631 585
Chemicals 164 526
Materials, supplies and other 262 291
-----------------------------------
1,057 1,402
Prepaid expenses and other current assets 1,227 1,175
-----------------------------------
Total Current Assets 8,671 8,297
Long-term receivables 835 815
Investments and advances 8,004 5,231
Properties, plant and equipment, at cost 51,985 54,212
Less: accumulated depreciation, depletion and amortization 29,040 28,895
-----------------------------------
22,945 25,317
Deferred charges and other assets 1,191 1,008
-----------------------------------
Total Assets $41,646 $40,668
===================================
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $ 1,714 $ 3,434
Accounts payable 3,350 3,103
Accrued liabilities 1,117 1,210
Federal and other taxes on income 1,630 718
Other taxes payable 449 424
-----------------------------------
Total Current Liabilities 8,260 8,889
Long-term debt 5,059 5,174
Capital lease obligations 300 311
Deferred credits and other non-current obligations 2,064 1,739
Deferred income taxes 5,185 5,010
Reserves for employee benefit plans 1,862 1,796
-----------------------------------
Total Liabilities 22,730 22,919
-----------------------------------
Preferred stock (authorized 100,000,000
shares, $1.00 par value, none issued) - -
Common stock (authorized 2,000,000,000 shares,
$.75 par value at September 30, 2000 and 1,000,000 shares,
$1.50 per value at December 31, 1999; 712,487,068 shares issued at
September 30, 2000 and December 31, 1999) 534 1,069
Capital in excess of par value 2,753 2,215
Deferred compensation (611) (646)
Accumulated other comprehensive loss (173) (115)
Retained earnings 19,825 17,400
Treasury stock, at cost (70,670,321 and 56,140,994 shares
at September 30, 2000 and December 31, 1999, respectively) (3,412) (2,174)
-----------------------------------
Total Stockholders' Equity 18,916 17,749
-----------------------------------
Total Liabilities and Stockholders' Equity $41,646 $40,668
===================================
See accompanying notes to consolidated financial statements.
-3-
CHEVRON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
------------------------
Millions of Dollars 2000 1999
- -------------------------------------------------------------------------------------------------------------------
Operating Activities
Net income $3,691 $1,261
Adjustments
Depreciation, depletion and amortization 2,151 1,966
Dry hole expense related to prior years' expenditures 27 103
Distributions less than income from equity affiliates (247) (244)
Net before-tax gains on asset retirements and sales (215) (300)
Net foreign exchange (gains) losses (80) 37
Deferred income tax provision 285 (120)
Net decrease in operating working capital 752 1,698
Other, net 47 (767)
------------------------
Net Cash Provided by Operating Activities 6,411 3,634
------------------------
Investing Activities
Capital expenditures (2,757) (3,489)
Proceeds from asset sales 381 583
Other investing cash flows, net 857 40
Net sales of marketable securities 208 72
Net purchase of other short-term investments (748) -
------------------------
Net Cash Used for Investing Activities (2,059) (2,794)
------------------------
Financing Activities
Net (payments) borrowings of short-term obligations (1,722) 127
Proceeds from issuance of long-term debt 25 702
Repayments of long-term debt and other financing obligations (127) (443)
Cash dividends paid (1,272) (1,199)
Net (purchases) sales of treasury shares (1,259) 105
------------------------
Net Cash Used for Financing Activities (4,355) (708)
------------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents - 2
------------------------
Net Change in Cash and Cash Equivalents (3) 134
Cash and Cash Equivalents at January 1 1,345 569
------------------------
Cash and Cash Equivalents at September 30 $1,342 $ 703
========================
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, 1999. 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, except for the special items described in Note 2, and
the 1999 material reclassification described in Note 3.
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 1999 Annual Report on Form 10-K.
The results for the three- and nine-month periods ended September 30, 2000, are
not necessarily indicative of future financial results.
Note 2. Net Income
Net income for the third quarter 2000 included net charges of $116 million for
special items, compared with net charges of $120 million in the 1999 third
quarter. The 2000 third quarter included charges of $136 million for
environmental remediation provisions at U.S. refining, marketing and
transportation and chemical facilities; $80 million for the impairment of
certain U.S. producing properties and pipeline assets; and $26 million for a
prior-year tax adjustment. These charges were partially offset by gains of $99
million from the sale of marketable securities and $27 million from the equity
accounting effect of common stock transactions by Chevron's Dynegy Inc. equity
affiliate.
Net income for the first nine months of 2000 included net charges of $203
million from special items, compared with net charges of $206 million in the
comparable 1999 period. In addition to the third quarter 2000 net special
charges of $116 million noted above, the nine-month 2000 results included
special charges of $62 million for a patent matter currently being litigated and
$25 million for prior-year tax adjustments.
Foreign currency gains included in third quarter 2000 net income were $75
million, compared with losses of $7 million in 1999. For the nine-month periods,
foreign currency gains were $150 million in 2000, compared with losses of $48
million in the comparable 1999 period.
Note 3. Formation of Chevron Phillips Chemical Company LLC
Effective July 1, 2000, Chevron and Phillips Petroleum Company (Phillips) formed
Chevron Phillips Chemical Company LLC (CPCC), a Delaware limited liability
company. CPCC is a joint venture that combined the petrochemicals businesses of
Chevron and Phillips and is owned 50 percent by each partner. Chevron is
accounting for its interest in CPCC using the equity method. Under this method,
the net amount of assets and liabilities contributed to CPCC was reclassified to
"Investments and Advances" in the Consolidated Balance Sheet. Chevron's share of
CPCC's results of operations is recorded to "Income from equity affiliates."
Because CPCC is a limited liability company, Chevron records the provision for
income taxes and related tax liability applicable to its share of CPCC's income
in its consolidated financial statements.
The equity accounting treatment for Chevron's share of the net assets
contributed to CPCC resulted in significant variances between the 2000 and 1999
periods in the individual line captions appearing in the financial statements.
The carrying amounts at July 1, 2000, of the principal assets and liabilities of
the businesses Chevron contributed to CPCC were $0.6 billion of net working
capital assets and $2.1 billion of net properties, plant and equipment, and $0.1
billion of investments and advances.
In July, the joint venture obtained debt financing, and made a cash payment of
$835 million to each owner. The finalization and settlement of the net working
capital items contributed by each partner is expected in the fourth quarter. Any
imbalances between the partners' contributions will be settled in cash and are
not expected to be material.
-5-
Note 4. Information Relating to the Statement of Cash Flows
The "Net decrease in operating working capital" is composed of the following:
Nine Months Ended
September 30,
-----------------------
Millions of Dollars 2000 1999
- -----------------------------------------------------------------------------------------
Increase in accounts and notes receivable $ (573) $ (475)
(Increase) decrease in inventories (59) 2
Increase in prepaid expenses and other current assets (98) (143)
Increase in accounts payable and accrued liabilities 481 1,532
Increase in income and other taxes payable 1,001 782
- -----------------------------------------------------------------------------------------
Net decrease in operating working capital $ 752 $ 1,698
- -----------------------------------------------------------------------------------------
In June 1999, the company reclassified a reserve of $964 million established for
the Cities Service litigation from "Deferred credits and other non-current
obligations" to "Accrued liabilities."
"Net Cash Provided by Operating Activities" includes the following cash payments
for interest on debt and for income taxes:
Nine Months Ended
September 30,
-------------------------
Millions of Dollars 2000 1999
- -----------------------------------------------------------------------------------------
Interest paid on debt (net of capitalized interest) $ 352 $ 333
Income taxes paid $ 1,766 $ 321
- -----------------------------------------------------------------------------------------
The "Net sales of marketable securities" consists of the following gross
amounts:
Nine Months Ended
September 30,
------------------------
Millions of Dollars 2000 1999
- -----------------------------------------------------------------------------------------
Marketable securities purchased $(1,955) $(2,230)
Marketable securities sold 2,163 2,302
- -----------------------------------------------------------------------------------------
Net sales of marketable securities $ 208 $ 72
- -----------------------------------------------------------------------------------------
"Other investing cash flows, net"includes $835 million paid to Chevron in July
2000 by its affiliate, Chevron Phillips Chemical Company LLC.
"Net purchases of other short-term investments," of $748 million in 2000 were in
a variety of short-term money market instruments, with maturities similar to the
company's commercial paper portfolio.
Included in "Proceeds from issuance of long-term debt" of $702 million in 1999
were cash proceeds of $620 million from the company's Employee Stock Ownership
Plan (ESOP) in exchange for the assumption of $620 million of existing ESOP debt
in July 1999. This transaction was recorded as an increase in cash and a
reduction in "Deferred Compensation."
The Consolidated Statement of Cash Flows excludes the following non-cash
transactions:
The company combined its petrochemicals businesses with those of Phillips
Petroleum Company in July 2000. An increase in Chevron's "Investments and
advances" of $2.8 billion resulted primarily from the contribution of
"Properties, plant and equipment" of $2.1 billion, net working capital assets of
$0.6 billion, and investments and advances of $0.1 billion.
-6-
The ESOP repaid $10 million and $70 million of matured debt guaranteed by
Chevron Corporation in January of 2000 and 1999, respectively. These payments
were recorded by the company as a reduction in its debt outstanding and in
"Deferred compensation." In June 1999, the ESOP borrowed an additional $25
million, which is guaranteed by Chevron Corporation. This was recorded by the
company as an increase in its debt outstanding and in "Deferred compensation."
In July 1999, the ESOP borrowed $620 million of fixed-rate debt in July 1999,
guaranteed by Chevron Corporation, to refinance ESOP debt assumed by Chevron.
This was recorded by the company as an increase in its debt outstanding and in
"Deferred compensation."
The Rutherford-Moran Oil Corporation and another interest in Block B 8/32
offshore Thailand were acquired in March 1999. The consideration for this
acquisition included 1.1 million shares of the company's treasury stock valued
at $91 million.
Note 5. Gain from the Equity Accounting Effect of Common Stock Transactions
by Dynegy Inc.
In accordance with its accounting policy under the Securities and Exchange
Commission's Staff Accounting Bulletin No. 51 (SAB 51), the company recorded, as
part of other income, a before-tax gain of $42 million in the third quarter
2000, resulting mainly from stock issuances by its Dynegy Inc. (Dynegy)
affiliate related to employee stock option programs. Income tax expense includes
$15 million for deferred income taxes related to these transactions. In the
fourth quarter 2000, the Company expects to record an additional special
before-tax gain of about $100 million related to Dynegy's public common stock
offering in October 2000.
Note 6. Proposed Merger with Texaco Inc.
On October 16, 2000, the Company announced that it had agreed to a merger with
Texaco Inc., creating a new company to be known as ChevronTexaco Corporation.
The merger, to be accounted for as a pooling of interests, is expected to be
accretive to the new company's earnings and cash flow per share. Under the
merger agreement, Texaco shareholders will receive .77 shares of Chevron common
stock for each share of Texaco common stock they own, and Chevron shareholders
will retain their existing shares. As a result of the merger, Chevron
stockholders will own approximately 61 percent of the combined equity and Texaco
stockholders will own about 39 percent. The merger is conditioned upon
shareholder approval by both companies, pooling of interests accounting
treatment and regulatory approvals.
For additional information regarding the merger, refer to the Current Report on
Form 8-K we filed with the U.S. Securities and Exchange Commission on October
16, 2000.
Note 7. Operating Segments and Geographic Data
Chevron manages its exploration and production; refining, marketing and
transportation; and chemicals businesses separately. The company's primary
country of operation is the United States, its country of domicile. Activities
in no other country meet the materiality requirements for separate disclosure.
"All Other" activities include the company's share of earnings from and
investment in Dynegy Inc., corporate administrative costs, worldwide cash
management and debt financing activities, coal mining operations, insurance
operations, and real estate activities.
-7-
Sales and other operating revenues by segments, including internal transfers,
for the three- and nine-month periods ended September 30, 2000 and 1999, are
presented in the following table.
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ----------------------
Millions of Dollars 2000 1999 2000 1999
- ---------------------------------------------------------------------------------------------------------------
Exploration and Production
- --------------------------
United States $ 1,693 $ 1,147 $ 4,254 $ 2,610
International 2,696 1,853 7,644 4,234
----------------------------------------------
4,389 3,000 11,898 6,844
Intersegment Elimination - United States (863) (577) (2,343) (1,299)
Intersegment Elimination - International (1,183) (879) (3,426) (1,967)
----------------------------------------------
Total Exploration and Production 2,343 1,544 6,129 3,578
----------------------------------------------
Refining, Marketing and Transportation
- --------------------------------------
United States 8,160 6,071 22,337 15,097
International 2,163 1,454 6,363 3,616
----------------------------------------------
10,323 7,525 28,700 18,713
Intersegment Elimination - United States (30) (107) (312) (255)
Intersegment Elimination - International (1) (3) (8) (11)
----------------------------------------------
Total Refining, Marketing and Transportation 10,292 7,415 28,380 18,447
----------------------------------------------
Chemicals*
- ---------
United States 82 773 2,055 2,120
International 193 195 593 563
----------------------------------------------
275 968 2,648 2,683
Intersegment Elimination - United States (20) (45) (119) (125)
Intersegment Elimination - International - (1) - (1)
----------------------------------------------
Total Chemicals 255 922 2,529 2,557
----------------------------------------------
All Other
- ---------
United States 93 99 294 293
International 4 1 12 5
----------------------------------------------
97 100 306 298
Intersegment Elimination - United States (23) (15) (69) (40)
Intersegment Elimination - International (2) (1) (8) (3)
----------------------------------------------
Total All Other 72 84 229 255
----------------------------------------------
Sales and Other Operating Revenues
- ----------------------------------
United States 10,028 8,090 28,940 20,120
International 5,056 3,503 14,612 8,418
----------------------------------------------
15,084 11,593 43,552 28,538
Intersegment Elimination - United States (936) (744) (2,843) (1,719)
Intersegment Elimination - International (1,186) (884) (3,442) (1,982)
----------------------------------------------
Total Sales and Other Operating Revenues $12,962 $ 9,965 $37,267 $24,837
==============================================
* Effective July 1, 2000, does not include revenues from petrochemicals
operations that were contributed to the Chevron Phillips Chemical Company
LLC joint venture, which is accounted for under the equity method.
-8-
The company evaluates the performance of its operating segments on an after-tax
basis, excluding the effects of debt financing interest expense or investment
interest income, both of which are managed by Chevron Corporation on a worldwide
basis. Corporate administrative costs and assets are not allocated to the
operating segments; however, operating segments are billed for direct corporate
services. Nonbillable costs remain as corporate center expenses. Net income by
segment for the three- and nine-month periods ended September 30, 2000 and 1999
is presented in the following table.
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
Millions of Dollars 2000 1999 2000 1999
- --------------------------------------------------------------------------------------------------------------
Exploration and Production
- --------------------------
United States* $ 522 $ 219 $1,275 $ 347
International 718 322 1,951 659
-----------------------------------------------
Total Exploration and Production 1,240 541 3,226 1,006
-----------------------------------------------
Refining, Marketing and Transportation
- --------------------------------------
United States 105 97 265 288
International 47 (21) 76 127
-----------------------------------------------
Total Refining, Marketing and Transportation 152 76 341 415
-----------------------------------------------
Chemicals
- ---------
United States 3 25 93 4
International 21 6 50 37
-----------------------------------------------
Total Chemicals 24 31 143 41
-----------------------------------------------
Total Segment Income 1,416 648 3,710 1,462
Interest Expense (70) (82) (246) (236
Interest Income 22 17 57 44
Other* 163 (1) 170 (9
- --------------------------------------------------------------------------------------------------------------
Net Income $ 1,531 $ 582 $3,691 $1,261
==============================================================================================================
* 1999 restated to conform to the 2000 presentation. Effective January 1, 2000, the company's share of
earnings from Dynegy Inc. is reported in Other.
-9-
Segment assets at September 30, 2000, and December 31, 1999, are presented in
the following table. Segment assets do not include intercompany investments or
intercompany receivables.
September 30, December 31,
Millions of Dollars 2000 1999
- ------------------------------------------------------------------------------------------------------
Exploration and Production
- --------------------------
United States $ 5,518 $ 5,215
International 14,125 13,748
--------------------------------
Total Exploration and Production 19,643 18,963
--------------------------------
Refining, Marketing and Transportation
- --------------------------------------
United States 8,357 8,178
International 3,923 3,609
--------------------------------
Total Refining, Marketing and Transportation 12,280 11,787
--------------------------------
Chemicals
- ---------
United States 2,495 3,303
International 711 923
--------------------------------
Total Chemicals 3,206 4,226
--------------------------------
--------------------------------
Total Segment Assets 35,129 34,976
--------------------------------
All Other
- ---------
United States 4,417 3,825
International 2,100 1,867
--------------------------------
Total All Other 6,517 5,692
--------------------------------
Total Assets - United States 20,787 20,521
Total Assets - International 20,859 20,147
- ------------------------------------------------------------------------------------------------------
Total Assets $41,646 $40,668
======================================================================================================
Note 8. Summarized Financial Data - Chevron U.S.A. Inc.
At September 30, 2000, Chevron U.S.A. Inc. was Chevron Corporation's principal
operating company, consisting primarily of the company's U.S. integrated
petroleum operations (excluding most of the domestic pipeline operations) and
the majority of the company's worldwide petrochemical operations. These
operations were conducted by Chevron U.S.A. Production Company, Chevron Products
Company and, until June 30, 2000, by Chevron Chemical Company LLC. As described
in Note 3 above, Chevron combined its petrochemicals businesses with those of
Phillips Petroleum Company on July 1, 2000, to form Chevron Phillips Chemical
Company LLC. Chevron U.S.A. Inc. holds a 50 percent equity ownership in CPCC.
Summarized financial information for Chevron U.S.A. Inc. and its consolidated
subsidiaries is presented as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
Millions of Dollars 2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------
Sales and other operating revenues $10,444 $8,182 $30,127 $20,481
Costs and other deductions 9,586 7,918 28,079 20,142
Net income 778 213 1,606 421
======================================================================================================
-10-
At September 30, At December 31,
Millions of Dollars 2000 1999*
- ------------------------------------------------------------------------------------------------------
Current assets $ 4,109 $ 3,889
Other assets 20,523 20,687
Current liabilities 4,218 4,685
Other liabilities 8,650 9,730
Net equity 11,764 10,161
======================================================================================================
Memo: Total Debt $ 5,415 $ 7,462
* Certain asset and liability balances have been restated. Net equity remains unchanged
Note 9. Summarized Financial Data - Chevron Transport Corporation Limited
Chevron Transport Corporation Limited (CTC), a Bermuda corporation, is an
indirect, wholly owned subsidiary of Chevron Corporation. Effective July 1,
1999, Chevron Transport Corporation, a Liberian corporation, was merged into
CTC, which assumed all of the assets and liabilities of Chevron Transport
Corporation. CTC is the principal operator of Chevron's international tanker
fleet and is engaged in the marine transportation of crude 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. In accordance with the
Securities and Exchange Commission's disclosure requirements for CTC, summarized
financial information for CTC and its consolidated subsidiaries is presented
below. This summarized financial data was derived from the financial statements
prepared on a stand-alone basis in conformity with accounting principles
generally accepted in the United States.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------
Millions of Dollars 2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------
Sales and other operating revenues $193 $122 $486 $392
Costs and other deductions 205 140 548 437
Net loss (10) (20) (62) (31)
======================================================================================================
At September 30, At December 31,
Millions of Dollars 2000 1999
- ------------------------------------------------------------------------------------------------------
Current assets $ 256 $ 184
Other assets 503 742
Current liabilities 460 580
Other liabilities 249 264
Net equity 50 82
======================================================================================================
In April 2000, CTC's parent contributed an additional $30 million of paid in
capital to CTC.
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
September 30, 2000.
Note 10. 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):
-11-
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
Millions of Dollars 2000 1999 2000 1999
- -------------------------------------------------------------------------------------------------------
Gross revenues* $5,129 $4,048 $14,034 $10,185
Income before income taxes 299 148 782 666
- -------------------------------------------------------------------------------------------------------
Net income 148 35 378 378
=======================================================================================================
* 1999 reclassified to conform to the 2000 presentation, netting
certain offsetting trading sale and purchase contracts. The
reclassification had no impact on net income.
Note 11. Income Taxes
"Income Tax Expense" for the third quarter and nine months of 2000 was $1.139
billion and $2.962 billion, respectively, compared with $525 million and $937
million for the comparable 1999 periods. The effective tax rate for the 2000
nine months was 44.5 percent compared with 42.6 percent in last year's nine
months. The increase in the effective tax rate was primarily the result of lower
after-tax earnings for equity affiliates as a proportion of before-tax income,
the absence of tax benefits attributable to the 1999 utilization of capital
losses, and a decline in U.S. tax credits as a proportion of before-tax income.
Partially offsetting these factors in 2000 were lower foreign income taxes as a
percentage of income and a reduction in the impact of prior-year tax
adjustments.
Note 12. Litigation
Chevron and five other oil companies filed suit in 1995 contesting the validity
of a patent granted to Unocal Corporation for reformulated gasoline, which
Chevron sells in California in certain months of the year. In March 2000, the
U.S. Court of Appeals for the Federal Circuit upheld a trial court's decision
that Unocal's patent was valid and enforceable, and assessed damages of 5.75
cents per gallon for gasoline produced in infringement of the patent. In May
2000, the Federal Circuit Court denied a petition for rehearing with the U.S.
Court of Appeals for the Federal Circuit filed by Chevron and the five other
defendants in this case. The defendant companies have petitioned the U.S.
Supreme Court for the case to be heard. Amicus briefs have been filed in support
of the petition by California, thirty two other states, the District of
Columbia, seven members of Congress, the American Petroleum Institute and other
trade associations, and General Motors. In October 2000, the Supreme Court
issued an order requesting the U.S. Solicitor General to submit a brief with its
views as to whether the case should be heard. If Unocal's patent ultimately is
upheld, the company's financial exposure includes royalties for production of
gasoline that is ruled to have infringed the patent, plus interest. As a result
of the March 2000 ruling, the company recorded an after-tax charge of $62
million in the first quarter. The majority of this charge pertained to the
estimated royalty on gasoline production in the early part of a four-year period
ending December 31, 1999, before the company modified its manufacturing
processes to minimize the production of gasoline that allegedly infringed on
Unocal's patented formulations. Subsequently, the company has accrued in the
normal course of business additional amounts for potential infringement of the
patent covered by the trial court's ruling. In June 2000, Chevron paid $22.7
million to Unocal - $17.2 million for the original court judgement and $5.5
million of interest and fees. Unocal has obtained additional patents for
alternate formulations that could affect a larger share of U.S. gasoline
production. Chevron believes these additional patents are invalid and
unenforceable. However, if such patents are ultimately upheld, the competitive
and financial effects on the company's refining and marketing operations, while
presently indeterminable, could be material.
There is an ongoing public debate concerning the petroleum industry's use of
MTBE and its potential environmental impact through seepage into groundwater.
Along with other oil companies, the company is a party to lawsuits and claims
related to the use of the chemical MTBE in certain oxygenated gasolines. These
actions may require the company to correct or ameliorate the alleged effects on
the environment of prior disposal or release of MTBE by the company or other
parties. Additional lawsuits and claims related to the use of MTBE may be filed
in the future. Costs to the company related to these lawsuits and claims are
indeterminable due to such factors as the unknown magnitude of possible
contamination, the unknown timing and extent of the corrective actions that may
be required, the determination of the company's liability in proportion to other
responsible parties, and the extent to which such costs are recoverable from
third parties. Chevron has eliminated the use of MTBE in gasoline it sells in
certain areas.
-12-
Note 13. Other Contingencies and Commitments
The U.S. federal income tax liabilities of the company have been settled through
1993. The company's California franchise tax liabilities have been settled
through 1991. Settlement of open tax years, as well as tax issues in other
countries where the company conducts its businesses, is not expected to have a
material effect on the consolidated financial position or liquidity of the
company and, in the opinion of management, adequate provision has been made for
income and franchise taxes for all years under examination or subject to future
examination.
The company and its subsidiaries have certain other contingent liabilities with
respect to guarantees, direct or indirect, of debt of affiliated companies or
others and long-term unconditional purchase obligations and commitments,
throughput agreements and take-or-pay agreements, some of which relate to
suppliers' financing arrangements.
The company is subject to loss contingencies pursuant to environmental laws and
regulations that in the future may require the company to correct or ameliorate
the effects on the environment of prior disposal or release of chemical or
petroleum substances, including MTBE, 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 factors such 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 has provided for known environmental
obligations that are probable and reasonably estimable, the amount of future
costs may be material to results of operations in the period in which they are
recognized. The company does not expect these costs to have a material effect on
its consolidated financial position or liquidity.
The company believes it has no material market or credit risk to its operations,
financial position or liquidity as a result of its commodities, and other
derivatives activities. However, the results of operations and financial
position of the company's equity affiliates Caltex and Dynegy, may be affected
by their business activities involving the use of derivative instruments.
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 in which it operates, including the United States. 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, Canada, Australia, the United
Kingdom, Norway, Republic of Congo, Angola, Nigeria, Democratic Republic of
Congo, Papua New Guinea, China, Venezuela, Thailand, Argentina and Brazil. The
company's Caltex affiliates have significant operations in Indonesia, Korea,
Australia, Thailand, the Philippines, Singapore, and South Africa. The company's
Tengizchevroil affiliate operates in Kazakhstan. The company's Dynegy affiliate
has operations in the United States, Canada, the United Kingdom and other
European countries.
Note 14. New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS
133). In June 1999, the FASB issued Statement No. 137, which deferred the
effective date of FAS 133, making the statement effective for all fiscal
quarters of fiscal years beginning after June 15, 2000, with earlier adoption
encouraged. In June 2000, the FASB issued Statement No. 138, which amended some
of the accounting and reporting provisions of FAS 133. The company will adopt
FAS 133, as amended by FAS 138, effective January 1, 2001. Based on its current
level of activity with derivative instruments, the Company does not expect
adoption of FAS 133 and FAS 138 to have a significant impact on its results of
operations and financial position. The results of operations and financial
position of certain equity affiliates may, however, be affected by their
business activities involving the use of derivative instruments and adoption of
FAS 133 and FAS 138. The effect of the adoption of FAS 133 and FAS 138 is under
review by these equity affiliates.
-13-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Third Quarter 2000 Compared With Third Quarter 1999
And Nine Months 2000 Compared With Nine Months 1999
Financial Results
- -----------------
EARNINGS SUMMARY
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- -------------------
Millions of Dollars 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------
Operating Earnings
Exploration and Production $1,290 $ 586 $3,276 $1,103
Refining, Marketing and Transportation 307 117 558 430
Chemicals and Other 50 (1) 60 (66
- ----------------------------------------------------------------------------------------------------------
Total* 1,647 702 3,894 1,467
Special Items (116) (120) (203) (206
- ----------------------------------------------------------------------------------------------------------
Net Income* $1,531 $ 582 $3,691 $1,261
- ----------------------------------------------------------------------------------------------------------
* Includes Foreign Currency Gains (Losses) $75 $(7) $150 $(48)
Net income for the third quarter of 2000 was $1.531 billion ($2.35 per share -
diluted), compared with third quarter 1999 net income of $582 million ($0.88 per
share - diluted). Net income for this year's third quarter included charges for
environmental remediation for U.S. refining, marketing and chemicals facilities
of $136 million, impairment of U.S. producing properties and pipeline assets of
$80 million and prior-period tax adjustments of $26 million. These charges were
partially offset by gains of $99 million from the sale of marketable securities
and $27 million from the equity accounting effect of common stock transactions
by Chevron's equity affiliate, Dynegy Inc. Last year's third quarter included
special charges of $79 million for asset impairments, $31 million for losses on
asset dispositions and $10 million for environmental remediation provisions.
Excluding net charges for special items in both quarters, earnings on an
operational basis were $1.647 billion ($2.53 per share - diluted), more than
double the $702 million ($1.07 per share - diluted), earned in the 1999 quarter.
Net income for the first nine months of 2000 was $3.691 billion ($5.65 per share
- - diluted), compared with nine months 1999 net income of $1.261 billion ($1.91
per share - diluted). Net income for the first nine months of 2000 included net
special charges of $203 million, while the 1999 period included net charges of
$206 million. After excluding these special items, operating earnings were
$3.894 billion ($5.96 per share - diluted) in 2000, compared with $1.467 billion
($2.23 per share - diluted) in 1999.
The improved financial performance for the quarter and year-to-date 2000
primarily reflected the continued strength of the company's worldwide
exploration and production (upstream) operations, which benefited from sharply
higher crude oil and natural gas prices and increased worldwide production - a
result of the company's ongoing strategic focus on growing the upstream
business.
Higher profits in the U.S. refining and marketing (downstream) business in the
third quarter 2000 complemented the very strong performance from the exploration
and production operations. U.S. downstream results reflected stronger industry
margins for most products and the absence of operating problems at the West
Coast refineries experienced in the 1999 period. International downstream
operating earnings remained depressed in the third quarter, driven primarily by
poor results from the company's Caltex affiliate. Though refining margins
gradually have strengthened in the Far East, product prices have not risen
sufficiently to recover the higher cost of crude oil and improve marketing
margins.
The strong operating earnings in the third quarter resulted in an average return
on capital employed for the 12 months ending September 30, 2000, of about 20
percent.
-14-
Operating Environment and Outlook
- ---------------------------------
Chevron's earnings are significantly affected by fluctuations in the price of
crude oil and natural gas. Prices in the first nine months of 2000 were
considerably higher than in the corresponding period in 1999 - primarily the
result of the 1999 agreement among certain OPEC and non-OPEC oil producing
countries to restrict the production of crude oil, as well as rising worldwide
demand and low petroleum inventories worldwide. The average spot price for West
Texas Intermediate (WTI), a benchmark crude oil, was $29.78 per barrel for the
first nine months of 2000, up nearly 70 percent from $17.58 per barrel in the
corresponding 1999 period. Average U.S. natural gas prices for the 2000 nine
months were also significantly higher. The average Henry Hub spot natural gas
price of $3.56 per thousand cubic feet increased 63 percent, compared with the
1999 nine months. Crude oil and natural gas prices will continue to fluctuate
for the remainder of the year, but are likely to remain higher than last year's
levels if worldwide demand continues to be strong and the oil producing
countries do not increase production substantially.
Chevron's production levels had not been materially affected by production
curtailments prior to the easing of the OPEC and non-OPEC restrictions in the
second and third quarters of this year. Similarly, the company does not expect
any change to these restrictions to have a material impact on its overall
production levels. However, such curtailments or limits may have an effect on
the level of new production from current and future development projects. As
producing countries' revenue streams fluctuate with changing prices and
production, their capital available to fund petroleum development activities may
change. In addition, civil unrest, political uncertainty and economic conditions
may affect the company's producing operations. Community protests have disrupted
the company's production in the past, most notably in Nigeria. The company
continues to monitor developments closely in the countries in which it operates.
Earnings from the company's worldwide refining, marketing and transportation
businesses generally remain low relative to the amount of capital employed. U.S.
downstream earnings improved in the third quarter 2000, and earnings in the
future will depend on refined products margins in Chevron's primary U.S.
operating areas - the West Coast, the South and Southwest. Caltex operations in
the Far East continue to suffer from weak refined product margins resulting from
over-capacity, higher feedstock costs and a highly competitive environment in
the Asia-Pacific market. Caltex may continue to be adversely affected by these
conditions throughout the remainder of this year.
The outlook for the company's chemicals businesses remains mixed. While results
early in the year benefited from price increases for certain commodity
chemicals, the industry has experienced a recent weakening of margins that could
result in lower near-term earnings.
Significant Developments
- ------------------------
Some of the operational highlights since the second quarter of this year were as
follows:
ChevronTexaco Merger Agreement: Chevron and Texaco announced in October an
agreement to combine the two companies into an integrated energy company that is
expected to achieve annual savings of at least $1.2 billion within 6 to 9 months
of the merger completion. Chevron will issue 0.77 of its common shares for each
share of Texaco common stock. The new company - ChevronTexaco - will have strong
upstream positions, including oil and gas reserves and production and
exploration opportunities; an integrated, worldwide refining and marketing
business; a global chemicals business; significant growth platforms in natural
gas and power; and industry-leading skills in technology innovation. The merger
is conditioned upon shareholder approval by both companies, pooling of interests
accounting treatment for the merger and government agency regulatory approvals.
Tengiz: Chevron reached final agreement on the purchase of an additional 5
percent stake in Tengizchevroil (TCO). Upon obtaining local approvals to close
the transaction, Chevron's equity interest in TCO will increase to 50 percent.
In the third quarter of 2000, TCO's average total gross crude oil production was
223,000 barrels per day. Gross production in the fourth quarter 2000 is
projected to average 260,000 barrels per day, as a result of the recent
completion of a processing plant expansion and turnaround work.
Caspian Pipeline: Construction of a pipeline by the Caspian Pipeline Consortium
(CPC), in which Chevron owns a 15 percent interest, is on schedule for a
mid-2001 start-up. The pipeline will connect the Tengiz Field in western
Kazakhstan to the Black Sea port of Novorossiysk. Nearly all of the 460 miles of
new pipe have been installed, and refurbishment work on the existing 475 miles
of pipeline is progressing. Work is also under way on the terminal, storage and
mooring facilities at Novorossiysk. CPC has spent more than $1.3 billion to date
on the project.
-15-
Angola: Chevron announced its sixth major discovery since 1997, and the second
this year, in deepwater Block 14, where the company is operator and holds a 31
percent interest. This discovery, named Lobito, followed the Tomboco discovery
earlier this year. The Lobito discovery will be followed by appraisal drilling
as well as geologic and engineering studies to evaluate the field and assess its
potential reserves. The first appraisal well is currently being drilled.
Development plans for both the Lobito and Tomboco fields are in the early
stages, but could provide synergies with the development of the Benguela and
Belize fields that were discovered in 1998.
Australia: In September, the North West Shelf Venture, in which Chevron has a
one-sixth interest, announced the signing of letters of intent to supply one
million tons of liquefied natural gas per year for 25 years to two Japanese
customers. These agreements provide the foundation for the expansion of the
joint venture's production facilities by 50 percent.
Gas-to-Liquids Activities: In September, Chevron and the Nigerian National
Petroleum Corp. (NNPC) announced additional major initiatives to convert natural
gas into clean petroleum fuels and to significantly reduce the amount of natural
gas being flared in their Nigerian joint venture exploration and production
operations. A Chevron and NNPC gas-to-liquids facility, which will combine
technologies from Sasol and Chevron, will be built adjacent to the joint
venture's existing operations at Escravos. In a separate development, Chevron
and Sasol also announced the signing of the final agreements for the formation
of a new company, Sasol Chevron Holdings, as part of their 50/50 global joint
venture founded on gas-to-liquids technology. The new company intends to
implement gas-to-liquids ventures worldwide, anticipating investments totaling
in excess of $5 billion over the next 5 to 10 years and using proprietary
technologies of both companies.
Contingencies and Significant Litigation
- ----------------------------------------
Chevron and five other oil companies filed suit in 1995 contesting the validity
of a patent granted to Unocal Corporation for reformulated gasoline, which
Chevron sells in California in certain months of the year. In March 2000, the
U.S. Court of Appeals for the Federal Circuit upheld a trial court's decision
that Unocal's patent was valid and enforceable and assessed damages of 5.75
cents per gallon for gasoline produced in infringement of the patent. In May
2000, the Federal Circuit Court denied a petition for rehearing with the U.S.
Court of Appeals for the Federal Circuit filed by Chevron and the five other
defendants in this case. The defendant companies petitioned the U.S. Supreme
Court in August 2000 for the case to be heard. Amicus briefs have been filed in
support of the petition by California, thirty two other states, the District of
Columbia, seven members of Congress, the American Petroleum Institute and other
trade associations, and General Motors. In October 2000, the Supreme Court
issued an order requesting the U.S. Solicitor General to submit a brief with its
views as to whether the case should be heard. If Unocal's patent ultimately is
upheld, the company's financial exposure includes royalties, plus interest, for
production of gasoline that is ruled to have infringed the patent. As a result
of the March 2000 ruling, the company recorded a special after-tax charge of $62
million in the first quarter. The majority of this charge pertained to the
estimated royalty on gasoline production in the early part of a four-year period
ending December 31, 1999, before the company modified its manufacturing
processes to minimize the production of gasoline that allegedly infringed on
Unocal's patented formulations. Subsequently, the company has accrued in the
normal course of business any future estimated liability for potential
infringement of the patent covered by the trial court's ruling. In June 2000,
Chevron paid $22.7 million to Unocal - $17.2 million for the original court
judgement and $5.5 million of interest and fees. Unocal has obtained additional
patents for alternate formulations that could affect a larger share of U.S.
gasoline production. Chevron believes these additional patents are invalid and
unenforceable. However, if such patents are ultimately upheld, the competitive
and financial effects on the company's refining and marketing operations, while
presently indeterminable, could be material.
There is an ongoing public debate concerning the petroleum industry's use of
MTBE and its potential environmental impact through seepage into groundwater.
Along with other oil companies, the company is a party to lawsuits and claims
related to the use of the chemical MTBE in certain oxygenated gasolines. These
actions may require the company to correct or ameliorate the alleged effects on
the environment of prior disposal or release of MTBE by the company or other
parties. Additional lawsuits and claims related to the use of MTBE may be filed
in the future. Costs to the company related to these lawsuits and claims are not
presently determinable. Chevron has eliminated the use of MTBE in gasoline it
sells in certain areas.
Chevron is subject to loss contingencies pursuant to environmental laws and
regulations that in the future may require the company to correct or ameliorate
the effects on the environment of prior disposal or release of chemical or
petroleum substances, including MTBE, by the company or other parties. Such
contingencies may exist for various sites including, but not limited to:
Superfund sites, refineries, oil fields, service stations, terminals and land
-16-
development areas, whether operating, closed or sold. The amount of such future
cost is indeterminable due to factors such 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 has provided for known environmental
obligations that are probable and reasonably estimable, the amount of future
costs may be material to results of operations in the period in which they are
recognized. The company does not expect these costs to have a material effect on
its consolidated financial position or liquidity.
The company and its subsidiaries have certain other contingent liabilities with
respect to guarantees, direct or indirect, debt of affiliated companies or
others, long-term unconditional purchase obligations and commitments, throughput
agreements and take-or-pay agreements, some of which relate to suppliers'
financing arrangements.
Chevron utilizes various derivative instruments to manage its exposure to price
risk stemming from its integrated petroleum activities. All of these instruments
are commonly used in oil and gas trading activities and are relatively
straightforward, involve little complexity and are of a short-term duration.
Most of the activity in these instruments is intended to hedge a physical
transaction. The company believes it has no material market or credit risks to
its operations, financial position or liquidity as a result of its commodities
and other derivatives activities, including forward exchange contracts and
interest rate swaps. Chevron's control systems are designed to monitor and
manage its financial exposures in accordance with company policies and
procedures. The results of operations and financial position of the company's
equity affiliates Dynegy and Caltex may be affected by their business activities
involving the use of derivative instruments.
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 in which it operates, including the United States. 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, Canada, Australia, the United
Kingdom, Norway, Republic of Congo, Angola, Nigeria, Democratic Republic of
Congo, Papua New Guinea, China, Venezuela, Thailand, Argentina and Brazil. The
company's Caltex affiliates have significant operations in Indonesia, Korea,
Australia, Thailand, the Philippines, Singapore, and South Africa. The company's
Tengizchevroil affiliate operates in Kazakhstan. The company's Dynegy affiliate
has operations in the United States, Canada, the United Kingdom and other
European countries.
Chevron receives claims from, and submits claims to, customers, trading
partners, host governments, contractors, insurers and suppliers. The amounts of
these claims, individually and in the aggregate, may be significant and take
lengthy periods to resolve. The company also suspends the costs of exploratory
wells pending a final determination of the commercial potential of the related
oil and gas fields. The ultimate disposition of these well costs is dependent on
the results of future drilling activity and/or development decisions. If the
company decides not to continue development, the costs of these wells are
expensed. The company and its affiliates also continue to review and analyze
their operations and may close, abandon, sell, exchange, acquire or restructure
assets to achieve operational or strategic benefits and to improve
competitiveness and profitability. These activities, individually or together,
may result in gains or losses in future periods.
New Accounting Standards
- ------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS
133). In June 1999, the FASB issued Statement No. 137, which deferred the
effective date of FAS 133, making the statement effective for all fiscal
quarters of fiscal years beginning after June 15, 2000, with earlier adoption
encouraged. In June 2000, the FASB issued Statement No. 138, which amended some
of the accounting and reporting provisions of FAS 133. The company will adopt
FAS 133, as amended by FAS 138, effective January 1, 2001. Based on its current
level of activity with derivative instruments, the company does not expect
adoption of FAS 133 and FAS 138 to have a significant impact on its results of
operations and financial position. The results of operations and financial
position of certain equity affiliates may, however, be affected by their
business activities involving the use of derivative instruments and adoption of
FAS 133 and FAS 138. The effect of the adoption of FAS 133 and FAS 138 is under
review by these equity affiliates.
-17-
Review of Operations
- --------------------
Total revenues for the quarter were $13.6 billion, a 33 percent increase from
$10.2 billion in last year's third quarter. For the first nine months of 2000,
total revenues were $38.5 billion, compared with $25.6 billion in the 1999 nine
months. Revenues increased primarily on sharply higher prices for crude oil,
natural gas and refined products.
Third quarter 2000 total operating expenses (operating, selling, general and
administrative expenses) were $1.539 billion, excluding special items, or $90
million higher than during the 1999 third quarter. For the nine-month period,
total operating expenses, excluding special items, were $4.755 billion, compared
with $4.557 billion in last year's period. On a per-barrel basis, the company's
total operating expenses were up 77 cents to $5.77 in the first nine months of
2000, compared with the prior-year period. Most of the increase was attributable
to higher fuel costs - associated with higher crude oil and natural gas prices -
for the company's refineries and other facilities, along with higher tanker
chartering rates to satisfy the company's increased international tanker
transportation requirements.
Depreciation, depletion and amortization (DD&A) expense of $801 million in the
third quarter 2000 was $34 million higher than the 1999 quarter. For the
nine-month period, DD&A of $2.151 billion was $185 million higher than the 1999
nine months. DD&A related to asset impairments was $139 million for the third
quarter and first nine months of 2000. In 1999, asset impairments raised DD&A by
$156 million for the third quarter and $211 million in the year to date period.
After adjusting for asset impairments, the remaining increases in DD&A for the
third quarter and year-to-date periods were primarily related to properties in
Thailand and Argentina acquired in 1999. In the third quarter, these increases
were partially offset by lower DD&A for chemicals operations due to the absence
of depreciation for assets contributed to the Chevron Phillips Chemical Company
LLC equity affiliate in July 2000.
Taxes on income for the third quarter and nine months of 2000 were $1.139
billion and $2.962 billion, respectively, compared with $525 million and $937
million for the comparable 1999 periods. The effective tax rate for the 2000
nine-month period was 44.5 percent, compared with 42.6 percent in last year's
nine months. The increase in the effective tax rate was primarily the result of
lower after-tax earnings from equity affiliates as a proportion of before-tax
income, the absence of tax benefits attributable to the 1999 utilization of
capital losses, and a decline in U.S. tax credits as a proportion of before-tax
income. Partially offsetting these factors in 2000 was lower foreign income
taxes as a percentage of income and a reduction in the impact of prior year tax
adjustments.
Foreign currency gains increased third quarter 2000 net income by $75 million,
while losses of $7 million decreased earnings in the year-ago quarter. For the
nine-month periods, foreign currency gains were $150 million in 2000, compared
with losses of $48 million in the 1999 period. During 2000, the U.S. dollar
strengthened against the currencies of a number of countries, particularly
Australia, the United Kingdom, Norway and Canada.
The following table details the company's after-tax net income by major
operating area.
-18-
NET INCOME BY MAJOR OPERATING AREA
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------
Millions of Dollars 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------
Exploration and Production
United States (1) $ 522 $219 $1,275 $ 347
International 718 322 1,951 659
- -----------------------------------------------------------------------------------------------------------
Total Exploration and Production 1,240 541 3,226 1,006
- -----------------------------------------------------------------------------------------------------------
Refining, Marketing and Transportation
United States 105 97 265 288
International 47 (21) 76 127
- -----------------------------------------------------------------------------------------------------------
Total Refining, Marketing and Transportation 152 76 341 415
- -----------------------------------------------------------------------------------------------------------
Chemicals 24 31 143 41
All Other (1),(2) 115 (66) (19) (201)
- -----------------------------------------------------------------------------------------------------------
Net Income $1,531 $582 $3,691 $1,261
===========================================================================================================
(1) 1999 restated to conform to the 2000 presentation. Effective with the first quarter 2000, the company's
share of earnings for Dynegy, Inc. is reported in All Other.
(2) Includes coal-mining operations, Dynegy Inc. equity earnings, worldwide cash
management and debt financing activities, corporate administrative costs,
marketable securities, corporate center costs, insurance operations and real
estate activities.
U.S. Exploration and Production
- -------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
Millions of Dollars 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------
Operating Earnings $572 $264 $1,325 $444
Special Items (50) (45) (50) (97)
- ----------------------------------------------------------------------------------------------------------
Net Income $522 $219 $1,275 $347
==========================================================================================================
U.S. exploration and production operating earnings rose in the 2000 periods on
significantly higher crude oil and natural gas realizations, offset partially by
higher operating expenses - mainly higher fuel costs - and the absence of gains
from property sales. Special items for the third quarter and year-to-date 2000
consisted of charges for the impairment of Mobile Blocks 861 and 916 in the
Norphlet Trend and the Gemini development located in Mississippi Canyon Block
292. Special items for the 1999 third quarter included write-downs of $45
million for oil and gas properties in the Gulf of Mexico. In addition to the
third quarter write-downs, earnings in the 1999 nine months were reduced by
special charges of $26 million for restructuring costs, $23 million for
litigation and regulatory issues and $3 million for environmental remediation
provisions.
For the third quarter 2000, the company's average crude oil realization of
$28.36 per barrel was up 57 percent from the year-ago quarter; the average
natural gas realization of $4.42 per thousand cubic feet rose 78 percent. On a
year-to-date basis, crude oil realizations in 2000 were $26.67 per barrel, 88
percent higher than the $14.20 per barrel obtained in 1999. Natural gas prices
were $3.41 per thousand cubic feet in the nine-month period, 66 percent higher
than the $2.06 per thousand cubic feet obtained last year.
Net liquids production for the third quarter and nine months of 2000 averaged
319,000 and 312,000 barrels per day, respectively, both down slightly from the
corresponding 1999 periods. Third quarter 2000 net natural gas production
averaged 1.6 billion cubic feet per day, down 3 percent from the 1999 third
quarter. On a year-to-date basis, natural gas production was down about 7
percent to 1.5 billion cubic feet per day this year. On an oil-equivalent basis,
overall production decreased about 2 percent from the year-ago quarter and 3
percent year to date. New and enhanced production in deepwater and other areas
of the Gulf of Mexico was more than offset by the effects of asset sales and
normal field declines. The third quarter's oil-equivalent production was the
highest quarterly average thus far in 2000, partly as a result of increased well
workover and development drilling activity, undertaken to realize additional
benefits from higher oil and gas prices through increased production.
-19-
International Exploration and Production
- ----------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------
Millions of Dollars 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------
Operating Earnings* $718 $322 $1,951 $659
Special Items - - - -
- ----------------------------------------------------------------------------------------------------------
Net Income* $718 $322 $1,951 $659
==========================================================================================================
* Includes Foreign Currency Gains (Losses) $42 $(3) $91 $(31)
International exploration and production earnings more than doubled in the third
quarter 2000, and nine-month earnings nearly tripled, primarily due to higher
crude oil and natural gas prices and higher oil-equivalent production. The 2000
third quarter also included a benefit of about $30 million from a new Memorandum
of Understanding issued by the Nigerian government in the third quarter that
changed the method of compensation to joint venture oil operators retroactive to
the beginning of the year.
Net liquids production increased 4 percent versus the 1999 quarter to 822,000
barrels per day and 5 percent, compared with nine months 1999 to 836,000 barrels
per day. Production increases in Angola and Australia, combined with production
from properties acquired last year in Argentina and Thailand, offset declines in
Indonesia and Colombia. The lower production in Indonesia was primarily
associated with the effect of higher prices on cost-oil recovery volumes under a
production-sharing agreement. Third quarter 2000 production does not include any
production from Colombia, compared with 12,000 barrels per day in the 1999
period under a joint venture agreement that expired earlier in the year. The
company operated under an operating service agreement from February 1, 2000,
until its expiration on July 31, 2000.
Net natural gas production declined 4 percent to 888 million cubic feet per day,
compared with last year's quarter. Decreases in net natural gas production
occurred primarily in the United Kingdom and Canada. These declines were
partially offset by increases in production from the properties acquired last
year in Thailand and Argentina and higher production from Nigeria and Tengiz. On
a year-to-date basis, 2000 natural gas production was 906 million cubic feet per
day, up nearly 5 percent from 1999 levels on higher production rates earlier
this year in Argentina, United Kingdom, Thailand and Kazakhstan.
On an oil-equivalent basis, production rose over 2 percent in the 2000 third
quarter and was up nearly 5 percent year to date. Absent the unfavorable effect
of higher prices on cost-oil recovery volumes allowed under an Indonesian
production-sharing agreement and on the company's share of production under
certain variable royalty agreements, oil-equivalent production would have risen
nearly 5 percent in the quarter and more than 8 percent year to date.
For the third quarter 2000, the company's average liquids realization of $28.83
per barrel was up 47 percent from $19.63 in the year-ago quarter. The company's
average natural gas realization of $2.36 per thousand cubic feet rose 25
percent. On a year-to-date basis, crude oil realizations in 2000 were $26.83 per
barrel, 78 percent higher than in 1999, and natural gas prices were $2.26 per
thousand cubic feet, 23 percent higher than last year.
Results for the 2000 third quarter and nine months included net foreign currency
gains of $42 million and $91 million, respectively, compared with losses of $3
million and $31 million in the corresponding periods of 1999. The changes
primarily reflect this year's favorable currency swings of the U.S. dollar
relative to the Australian, United Kingdom, Norwegian and Canadian currencies.
-20-
U.S. Refining, Marketing and Transportation
- -------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
Millions of Dollars 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------
Operating Earnings $260 $107 $482 $302
Special Items (155) (10) (217) (14)
- ----------------------------------------------------------------------------------------------------------
Net Income $105 $ 97 $265 $288
==========================================================================================================
Operating earnings for the third quarter 2000 were more than double the year-ago
quarter. Year-to-date operating earnings were $482 million, 60 percent higher
than the first nine months of 1999. The third quarter 2000 included a benefit of
$34 million from business interruption insurance proceeds related to a 1999
refinery incident. Last year's quarter included substantially higher losses from
refinery incidents that required the purchase of high-cost replacement products
to meet supply commitments.
Special items for the third quarter 2000 included charges of $125 million for
environmental remediation at the company's U.S. refining and marketing sites,
most of which are no longer owned or operated by the company, and a $30 million
charge for the impairment of a regulated pipeline system. The 1999 third quarter
included charges of $10 million for environmental remediation. In the first nine
months of 2000 and 1999, special charges reduced net income $217 million and $14
million, respectively. In addition to the third quarter special items in each
year's results, a charge of $62 million for a litigation matter reduced earnings
in the 2000 nine months and in the 1999 period environmental remediation
provisions of $55 million and restructuring costs of $24 million more than
offset a $75 million gain on the sale of a pipeline.
The company's average refined product sales realization for the third quarter of
2000 increased about 40 percent to $41.03 per barrel. Chevron benefited from
higher overall industry margins on the Gulf Coast in the 2000 quarter and from
significantly higher industry margins for jet and diesel fuels on the West
Coast. Motor gasoline margins on the West Coast were only slightly improved from
last year's quarter. The company's average refined product price was $38.47 per
barrel in the first nine months of 2000, compared with $25.43 in the 1999 nine
months.
Refined product sales volumes increased 3 percent to 1,396,000 barrels per day
in the quarter and 2 percent to 1,331,000 barrels per day in the first nine
months of 2000. Sales volumes for most products were higher than the prior-year
periods, including motor gasoline. However, branded gasoline sales were down
slightly from a year ago.
International Refining, Marketing and Transportation
- ----------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
Millions of Dollars 2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------
Operating Earnings* $47 $10 $76 $128
Special Items - (31) - (1)
- ----------------------------------------------------------------------------------------------------------
Net Income* $47 $ (21) $76 $127
==========================================================================================================
* Includes Foreign Currency Gains (Losses) $36 $1 $70 $(15)
International refining, marketing and transportation operating earnings are
composed primarily of Chevron's interest in Caltex Corporation, international
supply and trading activities, Canadian downstream and international shipping
operations.
There were no special items this year. A special charge of $31 million was
recorded on the sale of an equity interest in an affiliate in the third quarter
of last year. In addition to the third quarter special charge in last year's
results, the 1999 nine months included restructuring charges of $30 million
attributable to both Caltex and Chevron operations and a favorable Korean tax
adjustment of $60 million.
Net income from Caltex operations contains the effects from special items, other
non-recurring items, and foreign currency gains and losses. The following table
identifies the effects of these items:
-21-
Caltex
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
Millions of Dollars 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------
Reported Net Income (Loss) $ 1 $ (18) $ (2) $97
Less:
Special Items - (31) - (66)
Foreign Currency Gain (Loss) 35 1 65 (11)
Inventory Adjustments - 14 - 78
- ----------------------------------------------------------------------------------------------------
Adjusted Net (Loss) Income $ (34) $ (2) $ (67) $96
- ----------------------------------------------------------------------------------------------------
Caltex's Asia-Pacific market continues to suffer from surplus refined products
manufacturing capacity and a highly competitive environment, which has limited
the ability of companies to raise product prices sufficiently to recover higher
crude oil costs and improve marketing margins. While refinery margins in the
Asia-Pacific region increased in the third quarter 2000, refined product prices
and marketing margins remained weak.
Operating earnings for the company's international supply, trading and shipping
operations and Canadian downstream businesses improved in the third quarter
2000. For the nine months 2000, results from the company's international
shipping operations were lower as a result of losses arising earlier in the
year. These losses stemmed from the inability to recover higher costs for
in-charters through freight rates charged to the company's U.S. downstream
segment.
Chevron's third quarter total international downstream sales volumes were lower
in the 2000 periods due mainly to the absence in 2000 of Caltex's share of sales
by an affiliate that was sold in the 1999 third quarter and lower Caltex trading
volumes. Quarterly sales volumes declined from 815,000 barrels per day to
763,000 barrels per day. Nine-month sales volumes declined from 833,000 barrels
per day to 758,000 barrels per day.
Chemicals
- ---------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
Millions of Dollars 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------
Operating Earnings* $35 $31 $154 $132
Special Items (11) - (11) (91)
- ----------------------------------------------------------------------------------------------------------
Net Income* $24 $31 $143 $ 41
==========================================================================================================
* Includes Foreign Currency Losses $(2) $(3) $(4) $(1)
Operating earnings for chemicals in the third quarter improved compared with the
third quarter last year. Year-to-date operating earnings were up 17 percent to
$154 million. The third quarter and first nine months of 2000 included special
charges of $11 million for environmental provisions, while the 1999 year to date
included special charges of $43 million for asset write-offs, $28 million for
environmental provisions and restructuring costs of $20 million.
Earnings for the 2000 third quarter included the company's 50 percent share of
Chevron Phillips Chemical Company LLC (CPCC), which was formed on July 1, 2000.
For these contributed operations, earnings declined in the third quarter 2000,
as a result of lower margins across most product lines and interest charges on
debt incurred by CPCC. Slightly offsetting were increased earnings from
Chevron's retained specialty additives business due to improved margins and
higher sales volumes
-22-
All Other
- ---------
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -----------------
Millions of Dollars 2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------
Net Operating Earnings (Charges)* $ 15 $ (32) $ (94) $ (198)
Special Items 100 (34) 75 (3)
- ----------------------------------------------------------------------------------------------------------
Net Income (Loss)* $115 $ (66) $ (19) $ (201)
==========================================================================================================
* Includes Foreign Currency Losses $(1) $(2) $(7) $(1)
All Other activities include coal-mining operations, equity earnings of Dynegy
Inc., worldwide cash management and debt financing activities, corporate
administrative costs, insurance operations and real estate activities. For the
third quarter 2000, net operating earnings were $15 million, compared with net
operating charges of $32 million last year. Year-to-date 2000 operating charges
declined to $94 million from $198 million in the 1999 period.
The net benefit from special items in the third quarter of 2000 consisted of $99
million of gains from the sale of marketable securities and $27 million from the
equity accounting effect of common stock transactions by Dynegy, partially
offset by an unfavorable prior year's income tax adjustment of $26 million.
Special charges for the 2000 nine months included an additional $25 million
unfavorable prior year's income tax adjustment. The 1999 periods included
special charges of $34 for asset write-downs in the third quarter; year-to-date
1999 also included $29 million for restructuring charges, offset by asset sales
of $60 million.
Chevron's share of Dynegy operating earnings increased by $43 million to $57
million, primarily due to a gain from the sale of an affiliate, higher earnings
from the energy convergence business and additional earnings from the
transmission and distribution operations of Illinois Power, acquired in the
merger with Illinova during the first quarter of 2000. Dynegy contributed $90
million to company earnings in the first nine months of 2000 compared with $31
million in the 1999 period.
The company's coal operations incurred an operating loss of $3 million in the
third quarter of 2000, compared with earnings of $7 million in last year's third
quarter. Nine-month operating losses were $2 million in 2000, compared with
profits of $29 million last year. Operating earnings in 2000 were down primarily
due to the effects of United Mine Workers of America work stoppages at two of
the company's mines that began in May and did not end until early August,
coupled with lower sales prices for coal this year.
For activities other than coal operations and Dynegy, net operating charges were
lower in the 2000 third quarter because of lower interest expense, as a result
of lower debt levels. For the nine-month period, net charges declined due to
lower employee benefit costs and the absence of accruals associated with the
Cities Service litigation.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents totaled $1.342 billion at September 30, 2000 - about
the same as at year-end 1999. Cash provided by operating activities was $6.411
billion in the first nine months of 2000, up $2.777 billion from the
corresponding 1999 period. Cash provided by operating activities in 2000
benefited from the significantly higher crude oil and natural gas prices. The
increase in cash flows helped the company to reduce short-term debt by about
$1.7 billion and repurchase about $1.4 billion of the company's common shares in
the first nine months.
Total debt and capital lease obligations were $7.074 billion at September 30,
2000, a decrease of $1.845 billion from year-end 1999, largely due to the
significant reduction in short-term debt.
At September 30, 2000, Chevron had $3.250 billion in committed credit facilities
with various major banks, $2.725 billion of which had termination dates beyond
one year. These facilities support commercial paper borrowing and can be used
for general requirements. No borrowings were outstanding under these facilities
at September 30, 2000.
The company's current ratio was 1.05 at September 30, 2000. The company's
short-term debt, consisting primarily of commercial paper and the current
portion of long-term debt, totaled $4.439 billion at September 30, 2000.
Short-term debt of $2.725 billion was reclassified to long-term debt because
settlement of these obligations is not expected to require the use of working
capital during the next twelve months, as the company has the intent and the
ability, as
-23-
evidenced by committed credit arrangements, to refinance them on a long-term
basis. The company's practice has been to continually refinance its commercial
paper, maintaining levels it believes to be appropriate.
The company's debt ratio (total debt to total-debt-plus-equity) was 27.2 percent
at September 30, 2000, down from 33.4 percent at year-end 1999. The company
continually monitors its spending levels, market conditions and related interest
rates to maintain what it perceives to be reasonable debt levels.
In order to allow Chevron to maintain active relationships with institutional
investors in its commercial paper, the company instituted a program in 2000
under which it sells its commercial paper and reinvests the borrowed funds in
money market instruments with similar terms. At the end of the third quarter
2000, the company had incremental short-term debt and investments of about $750
million under this program.
In December 1997, Chevron's Board of Directors approved the repurchase of up to
$2 billion of its outstanding common stock, providing shares for use in its
employee stock option programs. Through October 5, 2000, Chevron purchased
16.888 million shares of its common stock in 2000 at an average cost of $83.26
per share, for a total cost of $1.406 billion, during 2000. Since the inception
of the share repurchase program until its suspension in early October 2000,
Chevron purchased 23.259 million shares on the open market for $1.890 billion,
at an average cost of $81.27 per share.
In early July, the newly formed affiliate, Chevron Phillips Chemical Company
LLC, obtained debt financing and made a $835 million cash payment to each of its
owners - Chevron and Phillips Petroleum Company.
On October 24, 2000, Chevron declared a quarterly dividend of 65 cents per
share, unchanged from the preceding quarter.
Worldwide capital and exploratory expenditures for the first nine months of
2000, including the company's share of affiliates' expenditures, were $3.682
billion, compared with $4.781 billion in the 1999 period. Expenditures for
exploration and production projects were $2.343 billion, or 64 percent of total
expenditures, reflecting the company's continued emphasis on increasing oil and
gas production. Expenditures for the first nine months of 2000 included an
additional investment of about $300 million in Dynegy Inc. Expenditures in last
year's period included the acquisition of Rutherford-Moran Oil Corp. and another
interest in Block B8/32 offshore Thailand in the first quarter, and the purchase
of Petrolera Argentina San Jorge in the third quarter.
CAPITAL AND EXPLORATORY EXPENDITURES BY MAJOR OPERATING AREA
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
Millions of Dollars 2000 1999 2000 1999
- ---------------------------------------------------------------------------------------------------------
United States
- -------------
Exploration and Production $ 372 $ 234 $ 934 $ 697
Refining, Marketing and Transportation 128 96 303 306
Chemicals 3 71 68 244
All Other 74 17 557 165
---------------------------------------------
Total United States 577 418 1,862 1,412
---------------------------------------------
International
- -------------
Exploration and Production 511 1,606 1,409 3,024
Refining, Marketing and Transportation 133 99 369 241
Chemicals 13 49 42 104
---------------------------------------------
Total International 657 1,754 1,820 3,369
---------------------------------------------
---------------------------------------------
Worldwide $1,234 $2,172 $3,682 $4,781
=============================================
-24-
SELECTED OPERATING DATA (1),(2)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- --------------------
2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------------
U.S. Exploration and Production
Net Crude Oil and Natural Gas Liquids Production (MBPD) 319 321 312 313
Net Natural Gas Production (MMCFPD) 1,615 1,664 1,546 1,659
Sales of Natural Gas (MMCFPD) 3,535 3,436 3,407 3,354
Sales of Natural Gas Liquids (MBPD) 180 127 151 127
Revenue from Net Production
Crude Oil ($/Bbl.) $28.36 $18.11 $26.67 $14.20
Natural Gas ($/MCF) $ 4.42 $ 2.48 $ 3.41 $ 2.06
International Exploration and Production
Net Crude Oil and Natural Gas Liquids Production (MBPD) 822 792 836 799
Net Natural Gas Production (MMCFPD) 888 929 906 867
Sales of Natural Gas (MMCFPD) 1,770 1,884 1,873 1,823
Sales of Natural Gas Liquids (MBPD) 69 64 66 56
Revenue from Liftings
Liquids ($/Bbl.) $28.83 $19.63 $26.83 $15.11
Natural Gas ($/MCF) $ 2.36 $ 1.89 $ 2.26 $ 1.83
Other Produced Volumes (MBPD) (3) 124 92 126 97
U.S. Refining, Marketing and Transportation
Sales of Gasoline (MBPD) (4) 685 680 687 664
Sales of Other Refined Products (MBPD) 711 677 644 641
Refinery Input (MBPD) 1,020 999 953 964
Average Refined Product Sales Price ($/Bbl.) $41.03 $29.48 $38.47 $25.43
International Refining, Marketing and Transportation
Sales of Refined Products (MBPD) (5) 763 815 758 833
Refinery Input (MBPD) 413 416 409 427
- -----------------------------------------------------------------------------------------------------------
(1) Includes equity in affiliates.
(2) MBPD = thousand barrels per day; MMCFPD = million cubic feet per day; Bbl. = barrel; MCF = thousand cubic feet
(3) Represents total field production under the Boscan operating service agreement in Venezuela, and other
operating service agreements.
(4) Includes branded and unbranded gasoline.
(5) 1999 amounts restated to conform to 2000 presentation.
-25-
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
A. El Segundo Refinery Oil Spill Penalty
The Los Angeles Regional Water Quality Control Board has proposed an
administrative civil penalty for a jet fuel spill to groundwater resulting from
a leak in an underground pipeline at the Company's El Segundo Refinery. The
Company has remediated the spill and taken preventive steps to reduce the risk
of future spills. A civil penalty in excess of $100,000 is likely to be imposed.
B. Uintah County, Utah - UIC Penalties
The Company has agreed to pay an administrative civil penalty of $500,000 to the
United States Environmental Protection Agency to settle alleged violations of
the agency's underground injection control regulations at the Company's former
production operations in Uintah County, Utah.
C. El Segundo Refinery Air Penalty
The Company has settled a previously reported civil penalty assessment by the
United States Environmental Protection Agency involving alleged violations of
the South Coast Air Quality Management District's Rule 1142 at the Company's El
Segundo Refinery. The settlement entails the payment of a $6,000,000 civil
penalty and a $1,000,000 supplemental environmental project.
Item 4. Submission of Matters to a Vote of Security Holders
None
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
company 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 company 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
(27) Financial Data Schedule
(b) Reports on Form 8-K
(1) A Current Report on Form 8-K was filed by the company on October
16, 2000. In this report, Chevron filed a joint press release
issued by Chevron and Texaco together with an Agreement and Plan of
Merger and two stock option agreements. The joint press release and
agreements were related to a planned merger of Chevron Corporation
and Texaco Inc. announced by both companies on October 16, 2000.
(2) An amended Current Report on Form 8-K was filed by the company on
October 16, 2000. In this amended report, Chevron re-filed the
documents previously filed in a Current Report on Form 8-K on
October 16, 2000.
-26-
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 November 8, 2000 By /s/ S.J. Crowe
------------------------- -------------------------------------------
S. J. Crowe, Vice President and Comptroller
(Principal Accounting Officer and
Duly Authorized Officer)
Exhibit 12
----------
CHEVRON CORPORATION - TOTAL ENTERPRISE BASIS
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (1)
(Dollars in Millions)
Nine Months Year Ended December 31,
Ended ------------------------------------------------
September 30, 2000 1999 1998 1997 1996 1995
------------------ -------- ------- -------- -------- --------
Net Income $3,691 $2,070 $ 1,339 $3,256 $2,607 $ 930
Income Tax Expense 2,962 1,578 495 2,246 2,133 859
Distributions (Less Than)
Greater Than Equity in Earnings of
Affiliates (247) (258) 25 (353) 83 (132)
Minority Interest 4 4 7 11 4 -
Previously Capitalized Interest
Charged to Earnings During Period 37 9 35 28 24 44
Interest and Debt Expense 357 472 405 312 364 401
Interest Portion of Rentals (2) 173 160 172 151 143 133
------- -------- ------- ------- ------- -------
Earnings before Provisions for
Taxes and Fixed Charges $6,977 $4,035 $2,478 $5,651 $ 5,358 $2,235
======= ======== ======= ======= ====== =======
Interest and Debt Expense $ 357 $ 472 $ 405 $ 312 $ 364 $ 401
Interest Portion of Rentals (2) 173 160 172 151 143 133
Capitalized Interest 20 59 39 82 108 138
------- -------- ------- ------- ------- -------
Total Fixed Charges $ 550 $ 691 $ 616 $ 545 $ 615 $ 672
======= ======== ======= ======= ======= =======
- -------------------------------------------------------------------------------------------------------------------
Ratio of Earnings to Fixed Charges 12.69 5.84 4.02 10.37 8.71 3.33
- -------------------------------------------------------------------------------------------------------------------
(1) Presentation of 1999 and prior years revised to conform to methodology for
calculating Earnings and Fixed Charges prescribed by Item 503 of Regulation
S-K, amended in 1998.
(2) Calculated as one-third of rentals.
-28-
5
0000093410
CHEVRON CORPORATION
1,000,000
9-MOS
DEC-31-2000
SEP-30-2000
1,342
1,318
3,763
36
1,057
8,671
51,985
29,040
41,646
8,260
5,359
0
0
534
18,382
41,646
37,267
38,475
0
31,822
0
0
356
6,653
2,962
3,691
0
0
0
3,691
5.66
5.65
