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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 15, 2001
Chevron Corporation
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(Exact name of registrant as specified in its charter)
Delaware 1-368-2 94-0890210
- ---------------------------- -------------------------- ---------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer No.)
of incorporation )
575 Market Street, San Francisco, CA 94105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 894-7700
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NONE
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(Former name or former address, if changed since last report)
Item 5. Other Events
Chevron Corporation's Audited 2000 Financial Statements, Management's
Discussion and Analysis of Financial Condition and Results of
Operations, and Supplemental Information are attached as Item 7,
Exhibit 99.1.
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) Exhibits.
23.1 Consent of PricewaterhouseCoopers LLP dated March 15, 2001
99.1 Chevron Corporation's Audited 2000 Financial Statements, Management's
Discussion and Analysis of Financial Condition and Results of Operations,
and Supplemental Information are attached as Item 7, Exhibit 99.1
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: March 15, 2001
CHEVRON CORPORATION
By /s/ S.J. Crowe
-------------------------------------
S. J. Crowe, Vice President and
Comptroller
(Principal Accounting Officer and
Duly Authorized Officer)
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 33-58463 and 333-90977) of Chevron Corporation, and
to the incorporation by reference in the Registration Statements on Form S-8
(Nos. 333-02011, 333-21805, 333-21807, 333-21809, 333-26731, 333-46261, 33-3899,
33-34039 and 33-35283) of Chevron Corporation, and to the incorporation by
reference in the Registration Statement on Form S-3 (No. 333-90977-01) of
Chevron Capital Corporation and Chevron Corporation, and to the incorporation by
reference in the Registration Statement on Form S-3 (No. 333-90977-02) of
Chevron Canada Capital Company and Chevron Corporation, and to the incorporation
by reference in the Registration Statement on Form S-3 (No. 33-14307) of Chevron
Capital U.S.A. Inc. and Chevron Corporation, and to the incorporation by
reference in the Registration Statements on Form S-4 (Nos. 33-54240) of Chevron
Corporation of our report dated February 26, 2001, relating to the financial
statements, which appears in this Form 8-K.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
San Francisco, California
March 15, 2001
Exhibit 99.1
INDEX TO MANAGEMENT'S DISCUSSION AND ANALYSIS
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page(s)
Management's Discussion and Analysis FS-2 to FS-11
Quarterly Results and Stock Market Data FS-12
Report of Management FS-12
Report of Independent Accountants FS-13
Consolidated Statement of Income FS-13
Consolidated Statement of Comprehensive Income FS-13
Consolidated Balance Sheet FS-14
Consolidated Statement of Cash Flows FS-15
Consolidated Statement of Stockholders' Equity FS-16
Notes to Consolidated Financial Statements FS-17 to FS-33
Supplemental Information on Oil and Gas
Producing Activities FS-34 to FS-39
Five-Year Financial Summary FS-40
FS-1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
-------------------------
2000 KEY INDICATORS
- -------------------
o Net income was $5.185 billion, the most profitable year in the company's
history
o Exploration and production operational earnings more than doubled to
$4.5 billion
o Average U.S. crude oil realization increased 69 percent to $27.20
per barrel
o Average U.S. natural gas realization was up 87 percent to $4.04 per
thousand cubic feet
o International net liquids production increased for the
11th consecutive year - up over 4 percent
o Worldwide net oil and gas reserve additions exceeded production for the
eighth consecutive year
o U.S. refining, marketing and transportation operational earnings doubled on
higher margins and improved plant reliability
o Annual dividends increased for the 13th consecutive year
KEY FINANCIAL RESULTS
- ---------------------
Millions of dollars,
except per-share amounts ..................... 2000 1999 1998
- -----------------------------------------------------------------------------------------
Net Income ................................. $ 5,185 $ 2,070 $ 1,339
Special Charges
Included in Net Income .................... (252) (216) (606)
--------------------------------------
Earnings, Excluding Special Items$ ......... 5,437 $ 2,286 $ 1,945
--------------------------------------
Per Share:
Net Income - Basic ...................... $ 7.98 $ 3.16 $ 2.05
- Diluted .................... $ 7.97 $ 3.14 $ 2.04
Dividends ............................... $ 2.60 $ 2.48 $ 2.44
Sales and
Other Operating Revenues .................. $50,592 $35,448 $29,943
Return on:
Average Capital Employed ................ 20.8% 9.4% 6.7%
Average Stockholders' Equity ............ 27.5% 11.9% 7.8%
=========================================================================================
NET INCOME BY MAJOR OPERATING AREA
- ----------------------------------
Millions of dollars 2000 1999 1998
- ---------------------------------------------------------------------
Exploration and Production
United States* .................... $ 1,889 $ 482 $ 330
International ..................... 2,602 1,093 707
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Total Exploration and Production .. 4,491 1,575 1,037
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Refining, Marketing and Transportation
United States ..................... 549 357 572
International ..................... 104 74 28
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Total Refining, Marketing
and Transportation .............. 653 431 600
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Chemicals .......................... 40 109 122
All Other* ......................... 1 (45) (420)
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Net Income ......................... $ 5,185 $ 2,070 $ 1,339
=====================================================================
*1999 and 1998 conformed for 2000 segment change to All Other for the company's
share of equity earnings in Dynegy Inc.
Chevron's record net income of $5.185 billion in 2000 was up significantly
over 1999 net income of $2.070 billion and 1998 net income of $1.339 billion.
Special charges in 2000 included asset write-downs, environmental remediation
reserve additions, prior-years' tax adjustments and litigation costs. Partially
offsetting these charges were gains from the equity accounting effect of the
issuance of additional common stock by the company's Dynegy equity affiliate,
asset sales, insurance recoveries for property damage, actuarial calculations
for the company's benefit plans and LIFO inventory adjustments. Net special
charges in 1999 included losses from asset write-downs, environmental
remediation provisions and restructuring charges, which were partially offset by
benefits from the sale of assets, LIFO inventory gains, and net favorable
adjustments for prior-years' taxes and litigation issues. In 1998, the net
special charges included a loss provision of $637 million for litigation,
substantially all of which pertained to a lawsuit against Gulf Oil Corporation
by Cities Service filed in 1982 - prior to the Chevron-Gulf merger in 1984.
Included in net income were foreign currency gains of $142 million in 2000,
and losses of $38 million in 1999 and $47 million in 1998.
Net income for the company's individual business segments is discussed in
the Results of Operations section.
ENVIRONMENT AND OUTLOOK
- ------------------------
Record earnings for Chevron in 2000 were largely the result of a
substantial improvement in crude oil and natural gas prices, along with higher
worldwide oil-equivalent production. Crude oil prices continued an upswing from
20-year lows that were experienced in late 1998. Natural gas prices - more
sensitive to regional supply-demand balances - rose to historic highs in the
U.S. spot market in late 2000. Capitalizing on these higher-price conditions,
the company increased its worldwide oil-equivalent production by 5 percent -
including the effect of volumes produced internationally under operating service
agreements, and adjusting for the effects of higher prices on Chevron's share of
net production under production-sharing contracts and variable royalty
arrangements.
The average spot price in 2000 for West Texas Intermediate (WTI), a
benchmark crude oil, was $30.34 per barrel, up nearly 60 percent from $19.30 per
barrel in 1999 and more than double the 1998 average price. The average U.S.
Henry Hub spot natural gas price of $4.23 per thousand cubic feet increased 86
percent, compared with the 1999 average of $2.27, and was more than twice the
1998 level. The sharp rise in crude oil prices was primarily the result of the
1999 agreement among certain OPEC and non-OPEC oil producing countries to
restrict production, as well as increased demand and lower petroleum inventories
worldwide. Higher U.S. natural gas prices reflected a strengthened economy and
sharply increased demand for natural gas from power generators, at the same time
North American natural gas producers struggled to increase supply and maintain
inventory levels.
Although down from their highs in 2000, crude oil and natural gas prices
remained strong in early 2001. In mid- February 2001, the price of WTI was about
$30 per barrel. The Henry Hub spot natural gas price that peaked at $10.50 per
thousand cubic feet in late December 2000 fell below $6.00 per thousand cubic
feet by mid-February. It is uncertain how long these price levels will continue.
Some factors
FS-2
that may affect future price changes include fluctuations in crude oil
production by producing countries, unforeseen supply disruptions, increases or
decreases in worldwide inventory levels, changes in demand for heating oil and
natural gas as a result of winter weather conditions, electricity generating
requirements, and the demand for refined products reflecting the overall
strength of the world economies. High crude oil and natural gas prices enhance
the company's revenues and earnings in exploration and production operations.
However, these same conditions could adversely affect financial results in the
refining and marketing and the chemicals businesses if the higher feedstock
costs cannot be recovered through sufficient product price increases.
Chevron's U.S. downstream margins and earnings improved substantially in
2000, despite higher crude oil feedstock costs and fuel expense for the
company's refineries. Earnings in the future will depend on refined products
margins in Chevron's primary U.S. operating areas- the West Coast, the South and
the South-west- and on safe, reliable refining operations. Internationally,
Caltex operations in the Asia-Pacific region continued to suffer from weak
refined products margins, resulting from surplus refining capacity, higher
feedstock costs and a highly competitive environment. Caltex may continue to be
adversely affected by these conditions throughout 2001.
The outlook for the company's chemicals businesses remains uncertain
because of fluctuating feedstock costs, depressed demand and excess capacity
conditions for commodity chemicals. While results early in 2000 benefited from
price increases for certain products, the industry experienced a weakening of
margins in the second half of the year. The company expects these conditions to
continue in 2001.
For the company as a whole in 2000, strong operating cash flows and a
continued focus on cost control- mitigating the effect of higher operating
expenses from increased fuel and utility costs- helped enable a 16 percent
increase in the 2001 capital budget to $6 billion. Profitable growth from such a
robust capital spending program is linked, among other things, to the company's
continued success in operating safely and achieving excellence in stewardship
over the company's global portfolio of world-class capital investment
opportunities.
CHEVRON-TEXACO MERGER AGREEMENT
- --------------------------------
Chevron and Texaco announced in October 2000 an agreement to combine the
two companies into an integrated global energy company. Upon approval by
regulatory authorities and stockholders of both companies, and fulfillment of
other conditions, Chevron will issue 0.77 of its common shares for each share of
Texaco common stock. The new company- ChevronTexaco Corporation- will have
significantly enhanced positions in upstream and downstream operations, a global
chemicals business, a growth platform in power generation, and industry-leading
skills in technology innovation. Synergistic annual savings of at least $1.2
billion are expected within six to nine months of the merger.
Chevron and Texaco anticipate that the U.S. Federal Trade Commission (FTC)
will require asset dispositions as a condition of not challenging the merger.
While the scope and method of such dispositions were unknown in late February,
the companies anticipated that divestiture of certain U.S. refining, marketing
and transportation businesses would be required to address market concentration
issues. Merger-related fees and expenses, consisting primarily of U.S.
Securities and Exchange Commission (SEC) filing fees; fees and expenses of
investment bankers, attorneys and accountants; and financial printing and other
related charges are estimated at $125 million for both companies. Substantially
all of these costs will be incurred in 2001.
Though not yet fully quantified, significant costs also will be incurred
after the merger for integration-related expenses, including the elimination of
duplicate facilities, operational realignment and severance payments for
work-force reductions.
The merger agreement provides for the payment of termination fees of as
much as $1 billion by either party under certain circumstances. Chevron and
Texaco also were granted options to purchase shares of the other, under the same
conditions as the payments of the termination fees. Texaco granted Chevron an
option to purchase 107 million shares of Texaco's common stock, at $53.71 per
share. Chevron granted Texaco an option to purchase 127 million shares of
Chevron's common stock, at $85.96 per share.
OTHER SIGNIFICANT DEVELOPMENTS
- -------------------------------
Key operating highlights and events during 2000 and early 2001 to capture
profitable growth opportunities included:
Tengiz - Tengizchevroil's (TCO) total gross crude oil production averaged
over 280,000 barrels per day in the fourth quarter 2000 - a record and exceeding
the target of 260,000 barrels per day - as a result of processing plant
expansion and the absence of turnaround work. For 2001, average gross production
is expected to be about 260,000 barrels per day, considering the effect of
planned shutdowns for maintenance and other operational activities. In January
2001, Chevron closed on its purchase of an additional 5 percent share in TCO,
bringing the company's ownership interest to 50 percent. As a result of the
purchase, Chevron will record an additional 177 million barrels of
oil-equivalent reserves in 2001.
Caspian Pipeline - Construction of a pipeline by the Caspian Pipeline
Consortium (CPC), in which Chevron owns a 15 percent interest, remains on
schedule for a mid-2001 start-up. The 900-mile pipeline will connect the Tengiz
Field in western Kazakhstan to the Black Sea port of Novorossiysk. This pipeline
will provide a less costly transportation alternative for the export of TCO's
crude oil production.
Angola - Chevron made two significant new oil discoveries - Tomboco and
Lobito - in deepwater Block 14, where the company is operator and has a 31
percent ownership interest. While development plans for the two new discoveries
are in the early stages, Tomboco and Lobito provide potential synergies with the
development of two other Block 14 discoveries, Benguela and Belize.
Chad-Cameroon - Chevron, with a 25 percent interest, and its partners began
the development of the Doba oil fields in southern Chad and construction of a
650-mile pipeline from the fields to marine export facilities on the coast of
Cameroon. This project is expected to cost $3.5 billion to develop and have a
20- to 30-year life. First production is expected in 2004.
Nigeria - Chevron was awarded interests in three deepwater oil prospecting
licenses (OPL) offshore Nigeria. Chevron, with a 50 percent interest, will serve
as operator of OPL 250. The company also was awarded 30 percent nonoperating
interests in OPL 214 and OPL 318. Work also continues on the initiative to
convert natural gas into clean petroleum fuels
FS-3
and to significantly reduce the amount of flared natural gas at the company's
producing operations. A gas-to-liquids facility, which will combine the
technologies from Sasol Limited and Chevron, will be built adjacent to existing
operations at Escravos.
Thailand - The government of Thailand approved Chevron's plan for the
development of North Jarmjuree, a 200-square-mile offshore production area
located in Block B8/32. North Jarmjuree is the fourth production area granted
within Block B8/32, which also includes the Tantawan, Benchamas and Maliwan
fields. Chevron is operator and holds a 52 percent interest in Block B8/32.
Canada - Chevron, as operator with a 43 percent interest, and its partners
began production of natural gas from two wells at Fort Liard, Northwest
Territories. Combined production is expected to average about 105 million cubic
feet per day of natural gas and byproducts in 2001. Construction also began on
the mining, extraction and upgrading facilities for the Athabasca Oil Sands
Project, in which Chevron has a 20 percent interest. The project is expected to
begin production in late 2002 and reach 155,000 barrels of bitumen per day at
its peak.
U.S. Gulf of Mexico - Two additional fields in the Viosca Knoll Carbonate
Trend began producing a combined 106 million cubic feet of natural gas per day
in November 2000. Chevron is the largest contiguous leaseholder in the Carbonate
Trend, holding a majority interest in 54 leases.
Oil and Gas Reserves Replacement - The company added 875 million barrels of
oil-equivalent reserves during 2000, or 152 percent of production for the year,
including the effects of sales and acquisitions. Among the major additions were
about 130 million barrels each for the Tengiz Field in Kazakhstan and the Chad
acquisition. More than 175 million barrels of the total amount were the result
of successful discoveries in areas that included Thailand, Argentina, Nigeria,
Angola, the United Kingdom and the U.S. Gulf of Mexico Shelf.
Chevron Phillips Chemical Company - Effective July 1, 2000, Chevron and
Phillips Petroleum Company (Phillips) formed Chevron Phillips Chemical Company
LLC (CPCC), a 50-50 joint venture that combined most of the companies'
petrochemicals businesses. At year-end 2000, CPCC had total assets of $6.7
billion.
ENVIRONMENTAL MATTERS
- ----------------------
Virtually all aspects of the businesses in which the company engages are
subject to various federal, state and local environmental, health and safety
laws and regulations. These regulatory requirements continue to increase in both
number and complexity and govern not only the manner in which the company
conducts its operations, but also the products it sells. Most of the costs of
complying with laws and regulations pertaining to company operations and
products are embedded in the normal costs of doing business.
Accidental leaks and spills requiring cleanup may occur in the ordinary
course of business. In addition to the costs for environmental protection
associated with its ongoing operations and products, the company may incur
expenses for corrective actions at various owned and previously owned facilities
and at third-party waste-disposal sites used by the company. An obligation may
arise when operations are closed or sold, or at non-Chevron sites where company
products have been handled or disposed of. Most of the expenditures to fulfill
these obligations relate to facilities and sites where past operations followed
practices and procedures that were considered acceptable at the time but now
require investigative and/or remedial work to meet current standards.
Using definitions and guidelines established by the American Petroleum
Institute, Chevron estimated its worldwide environmental spending in 2000 at
$910 million for its consolidated companies. Included in these expenditures were
$212 million of environmental capital expenditures and $698 million of costs
associated with the control and abatement of hazardous substances and pollutants
from ongoing operations. For 2001, total worldwide environmental capital
expenditures are estimated at $264 million. These capital costs are in addition
to the ongoing costs of complying with environmental regulations and the costs
to remediate previously contaminated sites.
The following table analyzes the annual changes to the company's before-tax
environmental remediation reserves, including those for Superfund sites. For
2000, the company recorded additional provisions for estimated remediation costs
at refined products marketing sites, chemicals manufacturing facilities, and
various owned and previously owned refining facilities.
Millions of dollars 2000 1999 1998
- ---------------------------------------------------------
Balance at January 1 $ 814 $ 826 $ 987
Expense Provisions 336 219 73
Expenditures (195) (231) (234)
- ---------------------------------------------------------
Balance at December 31 $ 955 $ 814 $ 826
=========================================================
Under provisions of the Superfund law, the Environmental Protection Agency
(EPA) has designated Chevron a potentially responsible party, or has otherwise
involved the company, in the remediation of 315 hazardous waste sites. The
company has made expense provisions or payments in 2000 and prior years for
approximately 223 of these sites. No single site is expected to result in a
material liability for the company. For the remaining sites, investigations are
not yet at a stage where the company is able to quantify a probable liability or
determine a range of reasonably possible exposures. The Superfund law provides
for joint and several liability. Any future actions by the EPA and other
regulatory agencies to require Chevron to assume other potentially responsible
parties' costs at designated hazardous waste sites are not expected to have a
material effect on the company's consolidated financial position or liquidity.
Remediation reserves at year-end 2000, 1999 and 1998 for Superfund sites were
$32 million, $33 million and $44 million, respectively.
It is likely that the company will continue to incur additional
liabilities, beyond those recorded, for environmental remediation relating to
past operations. These future costs are indeterminable due to such factors as
the unknown magnitude of possible contamination, the unknown timing and extent
of the corrective actions that may be required, the determination of the
company's liability in proportion to other responsible parties and the extent to
which such costs are recoverable from third parties. While the amount of future
costs may be material to the company's results of operations in the period in
which they are recognized, the company does not expect these costs to have a
material effect on its consolidated financial position or liquidity. Also, the
company does not believe its obligations to make such expen-
FS-4
ditures have had, or will have, any significant impact on the company's
competitive position relative to other petroleum or chemical companies.
The company maintains additional reserves for dismantlement, abandonment
and restoration of its worldwide oil and gas and coal properties at the end of
their productive lives. Many of these costs are related to environmental issues.
Expense provisions are recognized on a unit-of-production basis. The amount of
these reserves at year-end 2000 was $1.5 billion and is included in accumulated
depreciation, depletion and amortization in the company's consolidated balance
sheet.
For the company's other ongoing operating assets, such as refineries and
chemicals facilities, no provisions are made for exit or cleanup costs that may
be required when such assets reach the end of their useful lives, unless a
decision to sell or otherwise abandon the facility has been made.
LITIGATION AND OTHER UNCERTAINTIES
- ----------------------------------
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 September 1998
District Court 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. In
February 2001, the Supreme Court denied the petition to review the lower court's
ruling. The defendants are pursuing other legal alternatives to have Unocal's
patent ruled invalid.
If Unocal's patent ultimately is upheld, the company's financial exposure
includes royalties, plus interest, for production of gasoline that is proved to
have infringed the patent. As a result of the March 2000 ruling, the company
recorded a special after-tax charge of $62 million. 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 Chevron modified its
manufacturing processes to minimize the production of gasoline that allegedly
infringed on Unocal's patented formulations. Subsequently, the company has been
accruing 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 judgment for California gasoline produced in violation of Unocal's patent
from March through July 1996 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 ultimately are
upheld, the competitive and financial effects on the company's refining and
marketing operations, while presently indeterminable, could be material.
Another issue involving the company is the 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 currently determinable. Chevron has
eliminated the use of MTBE in gasoline it sells in certain areas.
Chevron also receives claims from and submits claims to customers, trading
partners, host governments, contractors, insurers and suppliers. The company is
also party to numerous other lawsuits. In some of these matters, plaintiffs and
claimants may seek to recover large and sometimes unspecified amounts. In
others, they may seek to have the company perform specific activities, including
remediation of alleged damages. These matters may remain unresolved for several
years, and it is not practical to estimate a range of possible loss. Although
losses or gains could be material to earnings in any given period, management
believes that resolution of these matters will not materially affect the
company's consolidated financial position or its liquidity.
At year-end 2000, the value of the assets of the company's main U.S.
pension plan exceeded the projected pension obligations by $657 million. This
excess can be attributable to higher than expected returns on the investment of
the plan assets over the past several years. If investment returns decline in
the future and are insufficient to offset increases in the plan's obligations,
pension expense may increase and additional funding may be required.
Company operations, particularly exploration and production, can be
affected by other 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, Chad, Equatorial Guinea,
Democratic Republic of Congo, Papua New Guinea, China, Thailand, Venezuela,
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.
The company and its affiliates 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.
For oil and gas producing operations, ownership agreements may provide for
periodic reassessments of equity interests in estimated oil and gas reserves.
These activities, individually or together, may result in gains or losses that
could be material to earnings in any given period.
FS-5
FINANCIAL INSTRUMENTS
- ----------------------
The company utilizes various derivative instruments, principally swaps and
futures, to manage its exposure to price risk stemming from its integrated
petroleum activities. All these instruments are commonly used in oil and gas
trading activities and involve little complexity. (See Note 9 to the
consolidated financial statements for further details.) Most of the activity in
these instruments is intended to hedge physical transactions. 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. Its
control systems are designed to monitor and manage its financial exposures in
accordance with company policies and procedures.
NEW ACCOUNTING STANDARDS
- -------------------------
The company adopted The Financial Accounting Standards Board (FASB)
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (FAS 133), as amended by FAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - An Amendment of FASB Statement No.
133," effective January 1, 2001. Because of Chevron's limited use of derivative
instruments (as described above), the company has elected not to account for its
derivative instruments as hedges. Accordingly, upon adoption the fair values of
the derivative instruments will be recorded as assets or liabilities on the
balance sheet, and changes in fair values of these instruments beyond normal
sales and purchases will be reflected in current income. The company may elect
to apply hedge accounting, which has different financial statement effects, to
possible future transactions involving derivative instruments, if significant.
Such an election would reduce earnings volatility that might otherwise result if
changes in fair values were recognized in current income. The adoption of FAS
133 and FAS 138 did not have a significant impact on the company's results of
operations or financial position.
In September 2000, the FASB issued Statement No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities -
A Replacement of FASB Statement No. 125" (FAS 140). FAS 140 is effective for
transfers occurring after March 31, 2001, and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. FAS 140 has no significant effect on Chevron's accounting or
disclosures for the types of transactions in the scope of the new standard.
EMPLOYEE TERMINATION BENEFITS AND OTHER RESTRUCTURING COSTS
- -----------------------------------------------------------
In 1999, the company implemented a staff reduction program in all of its
operating segments across several business functions and accrued $220 million
before tax for severance and other termination benefits for approximately 3,500
employees. Employees affected were primarily U.S.-based. All employee
terminations were completed by June 30, 2000, and no significant adjustments
were required for amounts previously accrued. Termination benefits for
approximately 3,100 of the 3,500 employees were payable from the assets of the
company's U.S. and Canadian pension plans. Most of the future savings connected
with this program relate to the termination and relocation of U.S.-based
employees.
RESULTS OF OPERATIONS
- ---------------------
Sales and other operating revenues were $50.6 billion in 2000, compared
with $35.4 billion in 1999 and $29.9 billion in 1998. Revenues for 2000 and 1999
increased on sharply higher prices for crude oil, natural gas and refined
products. The 2000 revenue increase was offset partially by the absence of
chemicals revenues in the second half of the year due to the July 1 formation of
the Chevron Phillips joint venture, which is accounted for under the equity
method.
Income from equity affiliates totaled $750 million in 2000, $526 million in
1999 and $228 million in 1998. Changes in earnings from Tengizchevroil and
Caltex were the primary cause of the fluctuations between years. In 2000,
increases in earnings from Tengizchevroil, Caltex and Dynegy were offset
partially by losses from the Chevron Phillips joint venture.
Other income totaled $787 million in 2000, $612 million in 1999 and $386
million in 1998. The fluctuations between years were the result of changes in
net gains from asset sales and interest income from investments.
Purchased crude oil and products costs in 2000 were 52 percent higher than
in 1999 and 94 percent higher than in 1998 because of higher prices for crude
oil, natural gas, refined products and chemicals feedstock. Prices fell
precipitously in 1998 and did not begin to recover until the second quarter
1999. Offsetting some of the effect of higher prices in 2000 was the absence of
costs as a result of the Chevron Phillips joint venture formation.
Operating, selling, general and administrative expenses, excluding the
effects of special items, increased to $6,487 million- from $6,169 million in
1999 and $6,251 million in 1998- primarily due to higher fuel costs. Mitigating
this effect
Millions of dollars 2000 1999 1998
- ----------------------------------------------------------------
Operating Expenses $5,177 $5,090 $4,834
Selling, General and
Administrative Expenses 1,725 1,404 2,239
- ----------------------------------------------------------------
Total Operating Expenses 6,902 6,494 7,073
Less: Special Charges, Before Tax 415 325 822
- ----------------------------------------------------------------
Adjusted Total Operating Expenses $6,487 $6,169 $6,251
================================================================
was the absence of expenses associated with the chemicals operations contributed
to the Chevron Phillips joint venture.
Exploration expenses of $564 million in 2000 were $26 million, or 5 percent
higher than 1999, and $86 million, or 18 percent higher than 1998. In 2000,
increased drilling in the deepwater U.S. Gulf of Mexico led to a doubling of
well write-offs for U.S. operations. This increase more than offset declines in
international operations. Compared with 1998, both U.S. and international well
write-offs in 1999 were significantly higher.
Depreciation, depletion and amortization expense was $2,848 million in
2000, compared with $2,866 million in 1999 and $2,320 million in 1998.
Depreciation expense associated with asset impairments in 2000 was $138 million,
compared with $394 million in 1999 and $100 million in 1998. Increased
production of crude oil and natural gas in 2000 and 1999 resulted in higher
depreciation expense in the company's worldwide upstream operations. The overall
2000 expense reflects lower depreciation in chemicals (resulting from the
Chevron Phillips joint venture formation) and other operations.
Income tax expenses were $4,085 million in 2000, $1,578 million in 1999 and
$495 million in 1998, reflecting effective income tax rates of 44 percent, 43
percent and 27 percent for each of the three years, respectively. The increase
in
FS-6
the 2000 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 were lower foreign income taxes as a percentage of income
and a reduction in the impact of prior- year tax adjustments.
The increase in the 1999 effective tax rate, compared with 1998, reflected
a higher proportion of earnings from international operations that were taxed at
higher rates; a lower beneficial impact from prior-period tax adjustments,
settlement of outstanding issues, and permanent differences in 1999; and lower
tax credits as a proportion of before-tax income. These factors were offset
slightly by the effect of lower taxes on taxable income received from equity
affiliates in 1999.
Foreign currency gains in 2000 were $142 million, compared with losses of
$38 million in 1999 and $47 million in 1998. During most of 2000, the U.S.
dollar strengthened against the currencies of a number of countries -
particularly Australia, the United Kingdom, Norway, Canada and certain countries
in the Caltex operating area - before weakening late in the year. In 1999, the
company's foreign exchange
SELECTED OPERATING DATA 2000 1999 1998
- ----------------------------------------------------------
U.S. EXPLORATION AND PRODUCTION
Net Crude Oil and Natural Gas
Liquids Production (MBPD) ....... 312 316 325
Net Natural Gas
Production (MMCFPD) ............. 1,558 1,639 1,739
Natural Gas Sales (MMCFPD) (1).... 3,448 3,162 3,303
Natural Gas Liquids Sales (MBPD)(1) 153 133 130
Revenues from Net Production
Crude Oil ($/Bbl) ............... $27.20 $16.11 $11.42
Natural Gas ($/MCF) ............. $ 4.04 $ 2.16 $ 2.02
INTERNATIONAL EXPLORATION
AND PRODUCTION(1)
Net Crude Oil and Natural Gas
Liquids Production (MBPD) ....... 847 811 782
Net Natural Gas
Production (MMCFPD) ............. 911 874 654
Natural Gas Sales (MMCFPD) ....... 1,813 1,774 1,504
Natural Gas Liquids Sales (MBPD) . 65 57 53
Revenues from Liftings
Liquids ($/Bbl) ................. $27.12 $17.31 $11.77
Natural Gas ($/MCF) ............. $ 2.45 $ 1.87 $ 1.94
Other Produced Volumes (MBPD) (2) 123 96 95
U.S. REFINING, MARKETING
AND TRANSPORTATION
Gasoline Sales (MBPD) ............. 683 667 653
Other Refined Products Sales (MBPD) 644 635 590
Refinery Input (MBPD) ............. 943 955 869
Average Refined Products
Sales Price ($/Bbl) ............. $39.32 $26.86 $22.37
INTERNATIONAL REFINING,
MARKETING AND TRANSPORTATION(1)
Refined Products Sales (MBPD) (3). 769 832 798
Refinery Input (MBPD) ............ 415 469 475
==========================================================
MBPD = Thousands of barrels per day; MMCFPD = Millions of cubic feet per day;
Bbl = Barrel; MCF = Thousands of cubic feet.
(1) Includes equity in affiliates.
(2) Represents total field production under the Boscan operating service
agreement in Venezuela, and in 2000 included a Colombian operating service
agreement.
(3) 1999 restated to conform to 2000 presentation.
losses occurred primarily in the company's operations in Canada and Australia
and in the Australian operations of Caltex. The most significant losses in 1998
were in Caltex's operations in Korea, Thailand and Japan.
U.S. exploration and production earnings in 2000 and 1999, excluding
special items, were driven by sustained increases in crude oil and natural gas
prices that began in early 1999. Expenses were higher in 2000, primarily for
well write-offs, production-related taxes and operating expenses- largely
associated with higher fuel costs. Gains from asset sales were lower than in
1999 and 1998.
The company's average 2000 U.S. crude oil realization of $27.20 per barrel
was $11.09 higher than in 1999 and $15.78
U.S. Exploration and Production
- ------------------------------
Millions of dollars 2000 1999* 1998*
- --------------------------------------------------------------------------
Earnings, Excluding Special Items $1,939 $ 774 $ 346
------------------------------------------------------------------------
Asset Write-Offs and Revaluations (50) (204) (44)
Asset Dispositions .................. - 3 47
Environmental Remediation Provisions - (23) 26
Restructurings and Reorganizations .. - (42) -
Other ............................... - (26) (45)
----------------------------
Total Special Items ................. (50) (292) (16)
----------------------------
Segment Income ...................... $1,889 $ 482 $ 330
==========================================================================
*Conformed to 2000 presentation; equity earnings from Dynegy Inc. included in
All Other.
higher than 1998. The 2000 average U.S. natural gas realization was $4.04 per
thousand cubic feet, $1.88 higher than in 1999 and double the prices in 1998.
Net liquids production for the year averaged 312,000 barrels per day, down
1 percent from 1999 and 4 percent from 1998. Net natural gas production in 2000
averaged 1.558 billion cubic feet per day, down 5 percent from 1999 and 10
percent from 1998. The lower oil-equivalent production reflected normal field
declines and asset sales, partially offset by new and enhanced production in the
Gulf of Mexico deep water and other areas of the gulf. The decline in U.S.
production in 2000 was mitigated by accelerating capital spending for
fast-payout well workovers and development drilling projects that increased
production and took advantage of the favorable price environment.
International Exploration and Production
- ----------------------------------------
Millions of dollars 2000 1999 1998
- -----------------------------------------------------------------
Earnings, Excluding Special Items $2,600 $1,156 $ 717
---------------------------------------------------------------
Asset Write-Offs and Revaluations - (37) (6)
Asset Dispositions ............. - 17 (56)
Prior-Year Tax Adjustments ..... - (23) 56
Restructurings and Reorganizations - (21) -
LIFO Inventory Gains and Other . 2 1 (4)
---------------------------
Total Special Items ............ 2 (63) (10)
---------------------------
Segment Income ................. $ 2,602 $ 1,093 $ 707
=================================================================
International exploration and production earnings, excluding special items,
improved in 2000 and 1999 on higher crude oil and natural gas prices and
steadily increasing production.
Chevron's average liquids realization, including equity affiliates, was
$27.12 per barrel in 2000, compared with $17.31 per barrel in 1999 and $11.77
per barrel in 1998. The average natural gas realization was $2.45 per thousand
cubic feet in 2000, compared with $1.87 in 1999 and $1.94 in 1998.
FS-7
Net liquids production of 847,000 barrels per day in 2000 increased 4
percent from 811,000 barrels per day in 1999 and 8 percent from 1998. Production
increases in Argentina, Angola, Australia and Thailand in 2000 more than offset
lower volumes from Indonesia and Colombia. In 1999, increases in Angola and
Kazakhstan, combined with production from properties acquired in Argentina and
Thailand, offset declines in Australia, Indonesia and Nigeria.
Net natural gas production of 911 million cubic feet in 2000 was up 4
percent from 1999 and nearly 40 percent from 1998. In 2000, production increases
were primarily in Argentina and Thailand, partially offset by sharply lower
production in Canada, due primarily to normal declines in mature fields.
Increases in 1999 were from the Britannia Field in the United Kingdom, as well
as from new production from the properties acquired in Thailand and Argentina.
For 11 consecutive years through 2000, international production volumes and
proved reserve quantities increased, reflecting the company's strategy of
expanding its international upstream operations. Oil-equivalent production in
2000 increased over 9 percent- including volumes produced under various
international operating service agreements, and adjusting for the effects of
higher prices on Chevron's share of net production under production-sharing
contracts and variable royalty arrangements. At year-end, oil-equivalent
reserves were higher than year-end 1999 by 8 percent.
U.S. Refining, Marketing and Transportation
- ------------------------------------------
Millions of dollars 2000 1999 1998
- -------------------------------------------------------------------
Earnings, Excluding Special Items $778 $375 $633
- -------------------------------------------------------------------
Asset Write-Offs and Revaluations (30) - (22)
Asset Dispositions - 75 -
Environmental Remediation Provisions (163) (71) (39)
Restructuring and Reorganizations - (35) -
LIFO Inventory Gains 3 13 -
Other (39) - -
---------------------------
Total Special Items (229) (18) (61)
---------------------------
Segment Income $549 $357 $572
===================================================================
U.S. refining, marketing and transportation earnings, excluding special
items, doubled in 2000 to $778 million and exceeded 1998 earnings of $633
million by 23 percent. Special items in 2000 included environmental remediation
provisions for certain of the company's refining and marketing sites, some of
which had been sold or closed in prior years. Earnings improved in 2000 on
higher margins and more reliable West Coast refinery operations. Earnings in
1999 suffered from lower sales margins and operational problems at the company's
California refineries, including a fire and, some months later, a detonation
that did not result in a fire, at the Richmond Refinery. These incidents
affected capacity and efficiency to produce blending components for diesel fuel,
jet fuel and gasoline. These effects in 1999 were offset partially by increases
in refined products sales volumes and higher proceeds from business interruption
insurance.
Refined products sales volumes of 1.327 million barrels per day in 2000
increased 2 percent over 1999 volumes and 7 percent from 1998 levels. The 2000
sales volumes reflected increases in higher- value gasoline and jet fuel
volumes, more than offsetting a decline in sales of residual fuel oil.
Additionally, sales in 2000 suffered from the effect of 1999 year-end
stockpiling by customers in anticipation of possible Year 2000-related
interruptions. U.S. refined products sales realizations were $39.32 per barrel,
up 46 percent from 1999 realizations of $26.86, and up 76 percent from 1998's
depressed levels.
International refining, marketing and transportation earnings include
results of the company's consolidated Canadian refining and marketing business,
international marine operations, international supply and trading activities,
and equity earnings of Caltex Corporation. Excluding special items, 2000
earnings of $116 million improved from $49 million in 1999, but were about 6
percent lower than the $123 million recorded in 1998. Earnings benefited from
foreign exchange gains of $74 million in 2000, compared with losses of $21
million in 1999 and $69 million in 1998.
International Refining, Marketing and Transportation
- ---------------------------------------------------
Millions of dollars 2000 1999 1998
- -------------------------------------------------------------------
Earnings, Excluding Special Items $116 $ 49 $123
- -------------------------------------------------------------------
Asset Dispositions - (31) -
Prior-year Tax Adjustments - 60 -
Environmental Remediation Provisions (30) - (11)
Restructuring and Reorganizations - (31) (43)
LIFO Inventory Gains (Losses) 18 27 (16)
Other - - (25)
---------------------------
Total Special Items (12) 25 (95)
---------------------------
Segment Income $104 $ 74 $ 28
===================================================================
The Caltex component of segment results for the years 1998 through 2000 is
shown in the table below.
Caltex
- ------
Millions of dollars 2000 1999 1998
- ---------------------------------------------------------------
Net Income (Loss) $ 4 $ 56 $(36)
Less:
Special Items 20 30 (82)
Foreign Currency Gains (Losses) 69 (15) (68)
LCM* Inventory Adjustments and Other (6) 76 (43)
------------------------
Adjusted (Loss) Earnings $(79) $(35) $157
===============================================================
*Lower of cost or market
Earnings for Caltex suffered from a very competitive operating environment,
including excess refinery capacity in the Asia-Pacific region during 2000 and
1999 and weak sales margins in most of its areas of operations. Competitive
pressures prevented refined products sales realizations from rising sufficiently
to recover higher crude costs.
International refined products sales volumes were 769,000 barrels per day
in 2000, down nearly 8 percent from 832,000 barrels per day in 1999 and down 4
percent from 798,000 barrels per day in 1998. Lower trading volumes and the
third quarter 1999 sale of a Caltex affiliate primarily were responsible for the
decline in sales volumes in 2000. Higher Caltex sales volumes primarily were
responsible for the 1999 increase.
FS-8
Chemicals
- ---------
Millions of dollars 2000 1999 1998
- ----------------------------------------------------------------
Earnings, Excluding Special Items $129 $205 $151
- ----------------------------------------------------------------
Asset Write-Offs and Revaluations (90) (43) (19)
Environmental Remediation Provisions (15) (28) (5)
Restructurings and Reorganizations - (22) -
LIFO Inventory Losses - (3) (5)
Other 16 - -
-------------------------
Total Special Items (89) (96) (29)
-------------------------
Segment Income $ 40 $109 $122
================================================================
Chemicals earnings in 2000 included results from the company's Oronite
division, the company's petrochemicals businesses prior to its contribution to
CPCC in July 2000, and equity earnings in CPCC for the second half of the year.
The special item for asset write-downs in 2000 was for this affiliate
impairment of assets in Puerto Rico. Operationally, commodity chemicals
businesses suffered in the second half of 2000 from generally weak product
demand, industry additions to manufacturing capacity and high raw material
costs.
Earnings in 1999 benefited from improved sales margins for major products,
higher sales volumes and lower operating expenses. The 1998 results were
adversely affected by plant shutdowns for expansions and storm damage repairs.
All Other
- ---------
Millions of dollars 2000 1999* 1998*
- -------------------------------------------------------------------
Net Charges, Excluding Special Items $(125) $(273) $ (25)
- -------------------------------------------------------------------
Asset Write-Offs and Revaluations - (62) (68)
Asset Dispositions 99 147 -
Environmental Remediation Provisions - (1) (10)
Prior-Year Tax Adjustments (77) 72 215
Restructurings and Reorganizations - (32) -
Cities Service Litigation - 104 (629)
Other 104 - 97
---------------------------
Total Special Items 126 228 (395)
---------------------------
Segment Credits (Charges) $ 1 $ (45) $(420)
===================================================================
* Conformed to 2000 presentation to include equity earnings from Dynegy Inc.
All Other consists of coal mining operations, the company's ownership
interest in Dynegy Inc., worldwide cash management and debt financing
activities, corporate administrative costs, insurance operations and real
estate activities.
Earnings, excluding special items, for the company's coal operations were
$1 million in 2000, compared with $34 million in 1999 and $77 million in 1998.
Earnings in 2000 were affected negatively by a union work stoppage for several
months during the year and operating and geologic complications at certain
mines. In 1999, results were lower than in 1998 primarily because of the absence
of earnings from an affiliate sold in the first quarter of 1999, lower sales
tonnage and prices for the remaining coal business, and adjustments to the
carrying value of the operations that were under active negotiation for sale at
that time.
Chevron's share of Dynegy operating earnings was $119 million, a
significant increase from $44 million in 1999 and $35 million in 1998.
Significantly higher prices for natural gas and natural gas liquids and an
increase in earnings from power generation activities were the primary reasons
for the improved results.
Net charges for the balance of the All Other segment, excluding special
items, were $245 million in 2000, $351 million in 1999 and $137 million in 1998.
Lower interest expense, higher interest income and decreases in other corporate
expenses resulted in lower 2000 net charges than in 1999. The primary factors in
the higher level of charges in 1999 as compared with 1998 were an increase in
debt and lower cash balances, which caused interest expense to be higher, and
reduced interest income.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities totaled $2.6 billion at
year-end 2000, up 29 percent from $2.0 billion at year-end 1999. Cash provided
by operating activities in 2000 was $8.7 billion, compared with $4.5 billion in
1999 and $3.7 billion in 1998, benefiting from higher earnings. In addition,
Chevron received a cash distribution in 2000 of $835 million from Chevron
Phillips Chemical Co. after the joint venture obtained debt financing. Improved
cash flows in 2000 permitted the company to reduce overall debt levels by $2.7
billion and repurchase $1.4 billion of the company's common shares. In 1999 and
1998, debt levels increased by $1.4 billion and $1.5 billion, respectively, as
cash provided by operating activities and asset sales was not sufficient to fund
the company's total cash requirements. In 1999, a payment of $775 million was
also made to Occidental Petroleum in settlement of the Cities Service lawsuit.
In 2000, the company paid dividends of $2.60 per share, compared with $2.48
per share in 1999 and $2.44 per share in 1998, increasing for the 13th
consecutive year. In January 2001, the company declared a regular quarterly
dividend of 65 cents a share on its common stock, unchanged from the previous
quarter.
The company's total debt and capital lease obligations were $6.232 billion
at December 31, 2000, a decrease of 30 percent from $8.919 billion at year-end
1999. In early February 2001, the company announced a public offering to
repurchase $350 million of 7.45 percent guaranteed notes maturing in 2004. At
the close of the offering in late February, about $230 million had been
acquired.
At year-end 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 also can be
used for general credit requirements. No borrowings were outstanding under these
facilities during the year or at year-end 2000. In addition, Chevron has three
existing "shelf" registrations on file with the Securities and Exchange
Commission that together would permit registered offerings of up to $2.8 billion
of debt securities.
The company's debt due within 12 months, consisting primarily of commercial
paper and the current portion of long-term debt, totaled $3.804 billion at
December 31, 2000. Of this total short-term debt, $2.725 billion was
reclassified to long-term debt at year-end 2000. Settlement of these obligations
is not expected to require the use of working capital in 2001, as the company
has the intent and the ability, as 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.
FS-9
To allow Chevron to continue active relationships with institutional
investors in its commercial paper, the company instituted a program in 2000
under which it sells commercial paper and reinvests the borrowed funds in
money-market instruments with similar terms. At December 31, 2000, the company
had incremental short-term debt and investments of $84 million under this
program.
The company's future debt level is dependent primarily on its results of
operations and capital-spending program. The company believes it has substantial
borrowing capacity to meet unanticipated cash requirements.
In December 1997, Chevron's Board of Directors approved the repurchase of
up to $2 billion of the company's outstanding common stock for use in its
employee stock option programs. In 2000, prior to suspending the program in
October upon announcement of the merger agreement with Texaco, the company had
repurchased 16.9 million shares at a cost of $1.406 billion. Total repurchases
from the program's inception were 23.3 million shares at a cost of $1.890
billion.
Financial Ratios
- ----------------
2000 1999 1998
- ---------------------------------------------------------
Current Ratio 1.1 0.9 0.9
Interest Coverage Ratio 19.9 8.2 5.1
Total Debt/Total Debt Plus Equity 23.8% 33.4% 30.7%
=========================================================
FINANCIAL RATIOS
- -----------------
The year-end current ratio is the ratio of current assets to current
liabilities. Generally, two items adversely affect Chevron's current ratio, but
in the company's opinion do not affect its liquidity. Current assets in all
years included inventories valued on a LIFO basis, which at year-end 2000 were
lower than current costs, based on average acquisition costs for the year, by
nearly $2 billion. Also, the company benefits from lower interest available on
short-term debt by continually refinancing its commercial paper. In past years,
Chevron's proportionately large amount of short-term debt contributed to keeping
its ratio of current assets to current liabilities at a relatively low level.
However, at year-end 2000, only $94 million of commercial paper, after excluding
$2.725 billion reclassified to long-term debt, was classified as a current
liability. Strong cash flows during 2000 permitted the company to reduce the
level of commercial paper required to fund its cash requirements.
The interest coverage ratio is defined as income before income tax expense,
plus interest and debt expense and amortization of capitalized interest, divided
by before-tax interest costs. Chevron's interest coverage ratio improved
significantly in 2000, primarily due to higher before-tax income and lower
interest expense as a result of lower debt levels. The company's debt ratio
(total debt/total debt plus equity) declined about a third to 23.8 percent in
2000, due to the significant reduction in overall debt balances and an increase
in equity for the year.
CAPITAL AND EXPLORATORY EXPENDITURES
- ----------------------------------------
Worldwide capital and exploratory expenditures for 2000 totaled $5.153
billion, including the company's equity share of affiliates' expenditures.
Capital and exploratory expenditures were $6.133 billion in 1999 and $5.314
billion in 1998. Expenditures for exploration and production activities
represented 62 percent of total outlays in 2000, compared with 73 percent in
1999 and 59 percent in 1998. International exploration and production spending
was 60 percent of worldwide exploration and production expenditures in 2000,
compared with 80 percent in 1999 and 62 percent in 1998, reflecting the
company's continuing focus on international exploration and production
activities. Included in 1999 were expenditures of about $1.7 billion - mainly
cash and assumption of debt - for the acquisition of Rutherford-Moran Oil
Corporation and Petrolera Argentina San Jorge S.A., exploration and production
businesses in Thailand and Argentina, respectively. All Other expenditures in
2000 included an additional investment of about $300 million in Dynegy Inc.
The company estimates 2001 capital and exploratory expenditures at $6.0
billion, including Chevron's share of spending by affiliates. This is up about
16 percent from 2000 spending levels. The 2001 program provides $3.7 billion for
exploration and production investments, of which $2.5 billion is for
international projects. Major areas of emphasis for exploration and production
are Kazakhstan, Africa, Argentina, Thailand, Canada and the deep waters of the
Gulf of Mexico. Successful implementation of the planned expenditure program for
2001 will depend upon many factors, including the ability of partners in many of
these projects, some of which are national petroleum companies of producing
countries, to fund their shares of project expenditures.
Refining and marketing expenditures are estimated at about $900 million,
with $600 million of that planned for projects in the United States, most of
which will be spent to increase retail volumes and convenience store revenue as
well as streamline distribution channels. The largest portion of the
international refining and marketing capital program will be invested by the
company's Caltex affiliate. Transportation expenditures are estimated at about
$500 million, primarily for international pipelines related to expanded upstream
production. Investments in power and natural gas facilities and distribution and
in technology will total $650 million, most of which will be invested by the
company's Dynegy affiliate. The company also plans to invest about $250 million
in the worldwide chemicals business.
The spending plans discussed above are for Chevron as a stand-alone entity
and do not reflect the impact of the pending merger with Texaco. They also do
not include the acquisition of an additional 5 percent equity in the
Tengizchevroil project in Kazakhstan, which closed in January 2001.
FS-10
Capital and Exploratory Expenditures
- ------------------------------------
2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------
Inter- Inter- Inter-
Millions of dollars U.S. national Total U.S. national Total U.S. national Total
- ----------------------------------------------------------------------------------------------------------------
Exploration and Production $ 1,265 $ 1,908 $ 3,173 $ 907* $ 3,591 $ 4,498 $ 1,214* $ 1,942 $ 3,156
Refining, Marketing
and Transportation 487 608 1,095 522 412 934 654 431 1,085
Chemicals 135 52 187 326 136 462 385 359 744
All Other 698 - 698 239* - 239 329* - 329
------------------------------------------------------------------------------------
Total $ 2,585 $ 2,568 $ 5,153 $ 1,994 $ 4,139 $ 6,133 $ 2,582 $ 2,732 $ 5,314
- ----------------------------------------------------------------------------------------------------------------
Total, Excluding Equity
in Affiliates $ 2,278 $ 1,908 $ 4,186 $ 1,859 $ 3,492 $ 5,351 $ 2,460 $ 1,860 $ 4,320
================================================================================================================
*Conformed to 2000 presentation to include the company's share of expenditures
by its Dynegy Inc. affiliate in All Other
FORWARD-LOOKING STATEMENTS
- --------------------------
This Form 8-K filing 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 "anticipates," "expects," "intends," "plans," "projects," "believes,"
"seeks," "estimates" and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and other factors,
some of which are beyond our control, are difficult to predict and could cause
actual results to differ from those expressed or forecasted in the
forward-looking statements. Therefore, actual outcomes and results may differ
materially from what is expressed or forecasted in such forward-looking
statements. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this report. Chevron undertakes
no obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
Among the factors that could cause actual results to differ materially are
crude oil and natural gas prices; refining margins and marketing margins;
chemicals prices and competitive conditions affecting supply and demand for
aromatics, olefins and additives products; actions of competitors; the
competitiveness of alternate energy sources or product substitutes;
technological developments; inability of the company's joint-venture partners to
fund their share of operations and development activities; 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; the ability to successfully consummate the proposed merger
with Texaco and successfully integrate the operations of both companies;
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; significant investment or product changes under
existing or future environmental regulations (including, particularly,
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.
FS-11
QUARTERLY RESULTS AND STOCK MARKET DATA
--------------------------------------
Unaudited
2000 1999
- -----------------------------------------------------------------------------------------------------------------------------
Millions of dollars, except per-share amounts 4TH Q 3RD Q 2ND Q 1ST Q 4TH Q 3RD Q 2ND Q 1ST Q
- -----------------------------------------------------------------------------------------------------------------------------
REVENUES AND OTHER INCOME
Sales and other operating revenues(1)..... $13,228 $12,997 $12,982 $11,385 $10,611 $ 9,965 $ 8,473 $ 6,399
Income from equity affiliates ............ 103 276 175 196 122 127 133 144
Other income ............................. 226 348 67 146 246 85 135 146
-----------------------------------------------------------------------------
TOTAL REVENUES AND OTHER INCOME .......... 13,557 13,621 13,224 11,727 10,979 10,177 8,741 6,689
-----------------------------------------------------------------------------
COSTS AND OTHER DEDUCTIONS
Purchased crude oil and products,
operating and other expenses .......... 8,918 8,809 9,071 7,960 7,307 7,006 6,275 4,426
Depreciation, depletion and amortization . 697 801 699 651 900 767 633 566
Taxes other than on income(1)............. 1,221 1,240 1,194 1,138 1,184 1,181 1,143 1,078
Interest and debt expense ................ 104 101 126 129 138 116 113 105
-----------------------------------------------------------------------------
TOTAL COSTS AND OTHER DEDUCTIONS ......... 10,940 10,951 11,090 9,878 9,529 9,070 8,164 6,175
-----------------------------------------------------------------------------
INCOME BEFORE INCOME TAX ................. 2,617 2,670 2,134 1,849 1,450 1,107 577 514
INCOME TAX EXPENSE ....................... 1,123 1,139 1,018 805 641 525 227 185
-----------------------------------------------------------------------------
NET INCOME (2) ........................... $ 1,494 $ 1,531 $ 1,116 $ 1,044 $ 809 $ 582 $ 350 $ 329
==========================================================================================================================
NET INCOME PER SHARE - BASIC ............. $ 2.32 $ 2.36 $ 1.71 $ 1.59 $ 1.24 $ 0.88 $ 0.54 $ 0.50
- DILUTED ........... $ 2.32 $ 2.35 $ 1.71 $ 1.59 $ 1.23 $ 0.88 $ 0.53 $ 0.50
==========================================================================================================================
DIVIDENDS PAID PER SHARE ................. $ 0.65 $ 0.65 $ 0.65 $ 0.65 $ 0.65 $ 0.61 $ 0.61 $ 0.61
==========================================================================================================================
COMMON STOCK PRICE RANGE - HIGH ......... $ 88.94 $ 92.31 $ 94.88 $ 94.25 $ 96.94 $100.81 $104.94 $ 90.31
- LOW .......... $ 78.19 $ 76.88 $ 82.31 $ 69.94 $ 83.38 $ 85.56 $ 86.38 $ 73.13
==========================================================================================================================
(1)Includes consumer excise taxes: $ 1,031 $ 1,067 $ 1,020 $ 942 $ 989 $ 1,023 $ 986 $ 912
(2)Net special (charges) credits
included in Net Income: $ (49) $ (116) $ (25) $ (62) $ (10) $ (120) $ (134) $ 48
The company's common stock is listed on the New York Stock Exchange (trading
symbol: CHV), as well as on the Chicago, Pacific, London and Swiss stock
exchanges. It also is traded on the Boston, Cincinnati, Detroit and Philadelphia
stock exchanges. As of February 26, 2001, stockholders of record numbered
approximately 107,000.
There are no restrictions on the company's ability to pay dividends. Chevron has
made dividend payments to stockholders for 89 consecutive years.
REPORT OF MANAGEMENT
TO THE STOCKHOLDERS OF CHEVRON CORPORATION
Management of Chevron is responsible for preparing the accompanying financial
statements and for ensuring their integrity and objectivity. The statements were
prepared in accordance with accounting principles generally accepted in the
United States of America and fairly represent the transactions and financial
position of the company. The financial statements include amounts that are based
on management's best estimates and judgments.
The company's statements have been audited by PricewaterhouseCoopers LLP,
independent accountants, selected by the Audit Committee and approved by the
stockholders. Management has made available to PricewaterhouseCoopers LLP all
the company's financial records and related data, as well as the minutes of
stockholders' and directors' meetings.
Management of the company has established and maintains a system of
internal accounting controls that is designed to provide reasonable assurance
that assets are safeguarded, transactions are properly recorded and executed in
accordance with management's authorization, and the books and records accurately
reflect the disposition of assets. The system of internal controls includes
appropriate division of responsibility. The company maintains an internal audit
department that conducts an extensive program of internal audits and
independently assesses the effectiveness of the internal controls.
The Audit Committee is composed of directors who are not officers or
employees of the company. It meets regularly with members of management, the
internal auditors and the independent accountants to discuss the adequacy of the
company's internal controls, its financial statements, and the nature, extent
and results of the audit effort. Both the internal auditors and the independent
accountants have free and direct access to the Audit Committee without the
presence of management.
/s/ David J. O'Reilly /s/ John S. Watson /s/ Stephen J. Crowe
David J. O'Reilly John S. Watson Stephen J. Crowe
Chairman of the Board Vice President Vice President
and Chief Executive Officer and Chief Financial Officer and Comptroller
February 26, 2001
FS-12
CONSOLIDATED STATEMENT OF INCOME
Year ended December 31
------------------------------------------------
Millions of dollars, except per-share amounts 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
REVENUES AND OTHER INCOME
Sales and other operating revenues* $50,592 $35,448 $29,943
Income from equity affiliates 750 526 228
Other income 787 612 386
- ----------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES AND OTHER INCOME 52,129 36,586 30,557
- ----------------------------------------------------------------------------------------------------------------------
COSTS AND OTHER DEDUCTIONS
Purchased crude oil and products 27,292 17,982 14,036
Operating expenses 5,177 5,090 4,834
Selling, general and administrative expenses 1,725 1,404 2,239
Exploration expenses 564 538 478
Depreciation, depletion and amortization 2,848 2,866 2,320
Taxes other than on income* 4,793 4,586 4,411
Interest and debt expense 460 472 405
- ----------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND OTHER DEDUCTIONS 42,859 32,938 28,723
- ----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 9,270 3,648 1,834
INCOME TAX EXPENSE 4,085 1,578 495
======================================================================================================================
NET INCOME $ 5,185 $ 2,070 $ 1,339
======================================================================================================================
NET INCOME PER SHARE OF COMMON STOCK - BASIC $ 7.98 $ 3.16 $ 2.05
- DILUTED $ 7.97 $ 3.14 $ 2.04
======================================================================================================================
*Includes consumer excise taxes: $ 4,060 $ 3,910 $ 3,756
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended December 31
-------------------------------------------------
Millions of dollars 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 5,185 $ 2,070 $ 1,339
- ----------------------------------------------------------------------------------------------------------------------
Holding gains on securities arising during period 56 29 3
Reclassification adjustment for gains included in net income (99) - -
- ----------------------------------------------------------------------------------------------------------------------
Net change during period (43) 29 3
Minimum pension liability adjustment (15) (11) (15)
Currency translation adjustment (7) (43) (1)
- ----------------------------------------------------------------------------------------------------------------------
OTHER COMPREHENSIVE LOSS, NET OF TAX (65) (25) (13)
- ----------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 5,120 $ 2,045 $ 1,326
======================================================================================================================
See accompanying notes to consolidated financial statements.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE STOCKHOLDERS
AND THE BOARD OF DIRECTORS OF CHEVRON CORPORATION
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, comprehensive income, stockholders' equity
and cash flows present fairly, in all material respects, the financial position
of Chevron Corporation and its subsidiaries at December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
February 26, 2001
FS-13
CONSOLIDATED BALANCE SHEET
At December 31
-----------------------------------------
Millions of dollars 2000 1999
- ----------------------------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 1,896 $ 1,345
Marketable securities 734 687
Accounts and notes receivable (less allowance: 2000 - $30; 1999 - $36) 3,837 3,688
Inventories:
Crude oil and petroleum products 631 585
Chemicals 191 526
Materials, supplies and other 250 291
-----------------------------------------
1,072 1,402
Prepaid expenses and other current assets 674 1,175
-----------------------------------------
TOTAL CURRENT ASSETS 8,213 8,297
Long-term receivables 802 815
Investments and advances 8,107 5,231
Properties, plant and equipment, at cost 51,908 54,212
Less: accumulated depreciation, depletion and amortization 29,014 28,895
-----------------------------------------
22,894 25,317
Deferred charges and other assets 1,248 1,008
-----------------------------------------
TOTAL ASSETS $41,264 $40,668
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $ 1,079 $ 3,434
Accounts payable 3,163 3,103
Accrued liabilities 1,530 1,210
Federal and other taxes on income 1,479 718
Other taxes payable 423 424
-----------------------------------------
TOTAL CURRENT LIABILITIES 7,674 8,889
Long-term debt 4,872 5,174
Capital lease obligations 281 311
Deferred credits and other noncurrent obligations 1,768 1,739
Noncurrent deferred income taxes 4,908 5,010
Reserves for employee benefit plans 1,836 1,796
-----------------------------------------
TOTAL LIABILITIES 21,339 22,919
Preferred stock (authorized 100,000,000 shares, $1.00 par value, none issued) - -
Common stock (authorized 2,000,000,000 shares, $0.75 par value at
December 31, 2000, and 1,000,000 shares, $1.50 par value at
December 31, 1999; 712,487,068 shares issued) 534 1,069
Capital in excess of par value 2,758 2,215
Deferred compensation (611) (646)
Accumulated other comprehensive income (180) (115)
Retained earnings 20,909 17,400
Treasury stock, at cost (2000 - 71,427,097 shares; 1999 - 56,140,994 shares) (3,485) (2,174)
-----------------------------------------
TOTAL STOCKHOLDERS' EQUITY 19,925 17,749
-----------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $41,264 $40,668
===================================================================================================================
See accompanying notes to consolidated financial statements.
FS-14
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31
------------------------------------------
Millions of dollars 2000 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $5,185 $2,070 $1,339
Adjustments
Depreciation, depletion and amortization 2,848 2,866 2,320
Dry hole expense related to prior years' expenditures 52 126 40
Distributions (less than) greater than income from equity affiliates (154) (258) 25
Net before-tax gains on asset retirements and sales (236) (471) (45)
Net foreign currency (gains) losses (67) 23 (20)
Deferred income tax provision 408 226 266
Net decrease (increase) in operating working capital (1) 846 636 (809)
(Decrease) increase in Cities Service provision - (149) 924
Cash settlement of Cities Service litigation - (775) -
Other, net (220) 187 (309)
------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES(2) 8,662 4,481 3,731
------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (3,657) (4,366) (3,880)
Proceeds from asset sales 524 992 434
Net sales (purchases) of marketable securities(3) 35 262 (183)
Net purchase of other short-term investments (84) - -
Distribution from Chevron Phillips Chemical Company 835 - -
Other, net (73) 32 (230)
------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (2,420) (3,080) (3,859)
------------------------------------------
FINANCING ACTIVITIES
Net (repayments) borrowings of short-term obligations (2,484) 219 1,713
Proceeds from issuances of long-term debt 24 1,221 224
Repayments of long-term debt and other financing obligations (216) (549) (388)
Cash dividends paid (1,688) (1,625) (1,596)
Net (purchases) sales of treasury shares (1,329) 108 (261)
------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES (5,693) (626) (308)
------------------------------------------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 2 1 (10)
------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 551 776 (446)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,345 569 1,015
------------------------------------------
CASH AND CASH EQUIVALENTS AT YEAR-END $1,896 $1,345 $ 569
=========================================================================================================================
See accompanying notes to consolidated financial statements.
(1) "Net decrease (increase) in operating working capital" is
composed of the following:
(Increase) decrease in accounts and notes receivable $ (663) $ (810) $ 552
(Increase) decrease in inventories (74) 72 (116)
Decrease (increase) in prepaid expenses and other current assets 53 (43) (23)
Increase (decrease) in accounts payable and accrued liabilities 712 915 (807)
Increase (decrease) in income and other taxes payable 818 502 (415)
--------------------------------------------
Net decrease (increase) in operating working capital $ 846 $ 636 $ (809)
======================================================================================================================
(2) "Net cash provided by operating activities" includes the
following cash payments for interest and income taxes:
Interest paid on debt (net of capitalized interest) $ 466 $ 438 $ 407
Income taxes paid $ 2,908 $ 864 $ 654
======================================================================================================================
(3) "Net sales (purchases) of marketable securities" consists
of the following gross amounts:
Marketable securities purchased $(6,223) $(2,812) $(2,679)
Marketable securities sold 6,258 3,074 2,496
---------------------------------------------
Net sales (purchases) of marketable securities $ 35 $ 262 $ (183)
=======================================================================================================================
FS-15
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
2000 1999 1998
---------------------- --------------------- ---------------------
Amounts in millions of dollars Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCK
Balance at January 1 712,487,068 $ 1,069 712,487,068 $ 1,069 712,487,068 $ 1,069
Change in par value - (535) - - - -
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31 712,487,068 $ 534 712,487,068 $ 1,069 712,487,068 $ 1,069
- ----------------------------------------------------------------------------------------------------------------------
TREASURY STOCK AT COST
Balance at January 1 56,140,994 $(2,174) 59,460,666 $(2,293) 56,555,871 $(1,977)
Purchases 16,952,503 (1,411) 56,052 (5) 5,246,100 (398)
Reissuances (1,666,400) 100 (3,375,724) 124 (2,341,305) 82
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31 71,427,097 $(3,485) 56,140,994 $(2,174) 59,460,666 $(2,293)
- ----------------------------------------------------------------------------------------------------------------------
CAPITAL IN EXCESS OF PAR
Balance at January 1 $ 2,215 $ 2,097 $ 2,022
Change in common stock par value 535 - -
Treasury stock transactions 8 118 75
-------- -------- --------
BALANCE AT DECEMBER 31 $ 2,758 $ 2,215 $ 2,097
- ----------------------------------------------------------------------------------------------------------------------
DEFERRED COMPENSATION
Balance at January 1 $ (646) $ (691) $ (750)
Net reduction of ESOP debt and other 35 45 59
-------- -------- --------
BALANCE AT DECEMBER 31 $ (611) $ (646) $ (691)
- ----------------------------------------------------------------------------------------------------------------------
ACCUMULATED OTHER
COMPREHENSIVE INCOME*
Balance at January 1 $ (115) $ (90) $ (77)
Change during year (65) (25) (13)
-------- -------- --------
BALANCE AT DECEMBER 31 $ (180) $ (115) $ (90)
- ----------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at January 1 $17,400 $16,942 $17,185
Net income 5,185 2,070 1,339
Cash dividends (per-share amounts
2000: $2.60; 1999: $2.48; 1998: $2.44) (1,688) (1,625) (1,596)
Tax benefit from dividends paid on
unallocated ESOP shares 12 13 14
-------- -------- --------
BALANCE AT DECEMBER 31 $20,909 $17,400 $16,942
- ----------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY
AT DECEMBER 31 $19,925 $17,749 $17,034
======================================================================================================================
See accompanying notes to consolidated financial statements.
*ACCUMULATED OTHER COMPREHENSIVE INCOME:
Currency Translation Unrealized Holding Minimum Pension
Adjustment Gain on Securities Liability Adjustment Total
- ---------------------------------------------------------------------------------------------------------------------------
Balance at January 1, 1998 $ (55) $ 10 $ (32) $ (77)
Change during year (1) 3 (15) (13)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 $ (56) $ 13 $ (47) $ (90)
Change during year (43) 29 (11) (25)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 $ (99) $ 42 $ (58) $(115)
Change during year (7) (43) (15) (65)
- ---------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 2000 $(106) $ (1) $ (73) $(180)
===========================================================================================================================
FS-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Millions of dollars, except per-share amounts
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Chevron Corporation manages its investments in, and provides administrative,
financial and management support to, U.S. and foreign subsidiaries and
affiliates that engage in fully integrated petroleum operations, chemicals
operations and coal mining. Collectively, these companies, referred to as
Chevron, operate in the United States and approximately 100 other countries.
Petroleum operations consist of exploring for, developing and producing crude
oil and natural gas; refining crude oil into finished petroleum products;
marketing crude oil, natural gas and the many products derived from petroleum;
and transporting crude oil, natural gas and petroleum products by pipelines,
marine vessels, motor equipment and rail car. Chemicals operations include the
manufacture and marketing of commodity petrochemicals, plastics for industrial
uses, and fuel and lube oil additives.
In preparing its consolidated financial statements, the company follows
accounting policies that are in accordance with accounting principles generally
accepted in the United States. This requires the use of estimates and
assumptions that affect the assets, liabilities, revenues and expenses reported
in the financial statements, as well as amounts included in the notes thereto,
including discussion and disclosure of contingent liabilities. While the company
uses its best estimates and judgments, actual results could differ from these
estimates as future confirming events occur.
The nature of the company's operations and the many countries in which it
operates subject it to changing economic, regulatory and political conditions.
The company does not believe it is vulnerable to the risk of a near-term severe
impact as a result of any concentration of its activities.
Subsidiary and Affiliated Companies
The consolidated financial statements include the accounts of subsidiary
companies more than 50 percent owned. Investments in and advances to affiliates
in which the company has a substantial ownership interest of approximately 20
percent to 50 percent, or for which the company exercises significant influence
but not control over policy decisions, are accounted for by the equity method.
Under this accounting, remaining unamortized cost is increased or decreased by
the company's share of earnings or losses after dividends. Gains and losses that
arise from the issuance of stock by an affiliate that results in changes in the
company's proportionate share of the dollar amount of the affiliate's equity are
recognized currently in income. Deferred income taxes are provided for these
gains and losses.
Derivatives
Gains and losses on hedges of existing assets or liabilities are included in the
carrying amounts of those assets or liabilities and are ultimately recognized in
income as part of those carrying amounts. Gains and losses related to qualifying
hedges of firm commitments or anticipated transactions also are deferred and are
recognized in income or as adjustments of carrying amounts when the underlying
hedged transaction occurs. Cash flows associated with these derivatives are
reported with the underlying hedged transaction's cash flows. If, subsequent to
being hedged, underlying transactions are no longer likely to occur, the related
derivatives gains and losses are recognized currently in income. Gains and
losses on derivatives contracts that do not qualify as hedges are recognized
currently in "Other income." The adoption on January 1, 2001, of Financial
Accounting Standards Board (FASB) Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," (FAS 133), and FAS 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities - An Amendment of
FASB Statement No. 133," is not expected to have a significant effect on the
company's results of operations or consolidated financial position.
Short-Term Investments
All short-term investments are classified as available for sale and are in
highly liquid debt or equity securities. Those investments that are part of the
company's cash management portfolio with original maturities of three months or
less are reported as "Cash equivalents." The balance of the short-term
investments is reported as "Marketable securities." Short-term investments are
marked-to-market with any unrealized gains or losses included in other
comprehensive income.
Inventories
Crude oil, petroleum products and chemicals are stated at cost, using a Last-In,
First-Out (LIFO) method. In the aggregate, these costs are below market.
Materials, supplies and other inventories generally are stated at average cost.
Properties, Plant and Equipment
The successful efforts method is used for oil and gas exploration and production
activities. All costs for development wells, related plant and equipment, and
proved mineral interests in oil and gas properties are capitalized. Costs of
exploratory wells are capitalized pending determination of whether the wells
found proved reserves. Costs of wells that are assigned proved reserves remain
capitalized. Costs also are capitalized for wells that find commercially
producible reserves that cannot be classified as proved, pending one or more of
the following: (1) decisions on additional major capital expenditures, (2) the
results of additional exploratory wells that are under way or firmly planned,
and (3) securing final regulatory approvals for development. Otherwise, well
costs are expensed if a determination cannot be made within one year following
completion of drilling as to whether proved reserves were found. All other
exploratory wells and costs are expensed.
Long-lived assets, including proved oil and gas properties, are assessed
for possible impairment by comparing their carrying values with the undiscounted
future net before-tax cash flows. Impaired assets are written down to their
estimated fair values, generally their discounted cash flows. For proved oil and
gas properties in the United States, the company generally performs the
impairment review on an individual field basis. Outside the United States,
reviews are performed on a country or concession basis. Impairment amounts are
recorded as incremental depreciation expense in the period in which the event
occurs.
Depreciation and depletion (including provisions for future abandonment and
restoration costs) of all capitalized costs of proved oil and gas producing
properties, except mineral interests, are expensed using the unit-of-production
method by individual fields as the proved developed reserves are produced.
Depletion expenses for capitalized costs of proved mineral interests are
recognized using the unit-of-production method by individual fields as the
related proved reserves are produced. Periodic valuation provisions for
impairment of capitalized costs of unproved mineral interests are expensed.
FS-17
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Depreciation and depletion expenses for coal are determined using the
unit-of-production method as the proved reserves are produced. The capitalized
costs of all other plant and equipment are depreciated or amortized over their
estimated useful lives. In general, the declining-balance method is used to
depreciate plant and equipment in the United States; the straight-line method
generally is used to depreciate international plant and equipment and to
amortize all capitalized leased assets.
Gains or losses are not recognized for normal retirements of properties,
plant and equipment subject to composite group amortization or depreciation.
Gains or losses from abnormal retirements are included in operating expense and
sales are included in "Other income."
Expenditures for maintenance, repairs and minor renewals to maintain
facilities in operating condition are expensed as incurred. Major replacements
and renewals are capitalized.
Environmental Expenditures
Environmental expenditures that relate to ongoing operations or to conditions
caused by past operations are expensed. Expenditures that create future benefits
or contribute to future revenue generation are capitalized.
Liabilities related to future remediation costs are recorded when
environmental assessments and/or cleanups are probable and the costs can be
reasonably estimated. Other than for assessments, the timing and magnitude of
these accruals are generally based on the company's commitment to a formal plan
of action, such as an approved remediation plan or the sale or disposal of an
asset. For the company's U.S. and Canadian marketing facilities, the accrual is
based on the probability that a future remediation commitment will be required.
For oil, gas and coal producing properties, a provision is made through
depreciation expense for anticipated abandonment and restoration costs at the
end of a property's useful life.
For Superfund sites, the company records a liability for its share of costs
when it has been named as a Potentially Responsible Party (PRP) and when an
assessment or cleanup plan has been developed. This liability includes the
company's own portion of the costs and also the company's portion of amounts for
other PRPs when it is probable that they will not be able to pay their share of
the cleanup obligation.
The company records the gross amount of its liability based on its best
estimate of future costs using currently available technology and applying
current regulations as well as the company's own internal environmental
policies. Future amounts are not discounted. Recoveries or reimbursements are
recorded as an asset when receipt is reasonably ensured.
Currency Translation
The U.S. dollar is the functional currency for the company's consolidated
operations as well as for substantially all operations of its equity affiliates.
For those operations, all gains or losses from currency transactions are
currently included in income. The cumulative translation effects for the few
equity affiliates using functional currencies other than the U.S. dollar are
included in the currency translation adjustment in stockholders' equity.
Taxes
Income taxes are accrued for retained earnings of international subsidiaries and
corporate joint ventures intended to be remitted. Income taxes are not accrued
for unremitted earnings of international operations that have been, or are
intended to be, reinvested indefinitely.
Revenue Recognition
Revenues associated with sales of crude oil, natural gas, coal, petroleum and
chemicals products, and all other sources are recorded when title passes to the
customer, net of royalties, discounts and allowances, as applicable. Revenues
from natural gas production from properties in which Chevron has an interest
with other producers are recognized on the basis of the company's net working
interest (entitlement method).
Stock Compensation
The company applies Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations in
accounting for stock options and presents in Note 20 pro forma net income and
earnings per share data as if the accounting prescribed by FAS No. 123,
"Accounting for Stock-Based Compensation," had been applied.
Note 2. 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 50-50 joint venture that
combined most of the petrochemicals businesses of Chevron and Phillips. Chevron
is accounting for its interest using the equity method, in accordance with
Accounting Principles Board (APB) Opinion No. 18, "The Equity Method of
Accounting for Investments in Common Stock." The net amount of assets and
liabilities contributed to CPCC was reclassified to "Investments and advances"
in the consolidated balance sheet. No gain or loss was recognized at the time of
contribution, as the transaction represented the exchange of a consolidated
business for an interest in a private joint venture and was not the culmination
of the earnings process. The difference of approximately $100 between the
carrying value of the investment and the amount of underlying equity in CPCC's
net assets is being amortized as a benefit to income over the next 10 years.
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 separately 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 2000 and 1999 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 approximately $600 of net working
capital; $2,100 of net properties, plant and equipment; and $100 of investments
and advances.
Upon formation, the joint venture obtained debt financing and made a cash
payment of $835 to each owner.
FS-18
Note 3. SPECIAL ITEMS AND OTHER FINANCIAL INFORMATION
Net income is affected by transactions that are unrelated to or are not
necessarily representative of the company's ongoing operations for the periods
presented. These transactions, defined by management and designated "special
items," can obscure the underlying results of operations for a year as well as
affect comparability of results between years.
Listed below are categories of special items and their net increase
(decrease) to net income, after related tax effects.
Year ended December 31
--------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------
Asset write-offs and revaluations
Exploration and production
- Oil and gas property
impairments - U.S. ...................... $ (50) $(204) $ (44)
- International .............. - - (6)
- Other asset write-offs ................. - (37) -
Refining, marketing and transportation
- Pipeline asset impairments - U.S. ...... (30) - (18)
- Marketing asset impairments - U.S. ..... - - (4)
Chemicals
- Manufacturing facility
impairment - U.S. ....................... (90) - -
- Other asset write-offs ................. - (43) (19)
All other
- Coal mining asset
impairment - U.S. ....................... - (34) -
- Information technology and
other asset write-offs .................. - (28) (68)
--------------------------------
(170) (346) (159)
Asset dispositions, net
Marketable securities ...................... 99 30 -
Pipeline interests ......................... - 75 -
Real estate ................................ - 60 -
Coal assets ................................ - 60 -
Oil and gas assets ......................... - 17 (9)
Caltex interest in equity affiliate ........ - (31) -
--------------------------------
99 211 (9)
--------------------------------
Prior-year tax adjustments .................. (77) 109 271
--------------------------------
Environmental remediation provisions, net (208) (123) (39)
--------------------------------
Restructurings and reorganizations
Corporate .................................. - (158) -
Caltex affiliate ........................... - (25) (43)
--------------------------------
- (183) (43)
--------------------------------
LIFO inventory gains (losses) ............... 23 38 (25)
--------------------------------
Other, net
Dynegy equity adjustment ................... 104 - -
Insurance recovery gain .................... 23 - -
Pension/OPEB curtailment gains ............. 16 - -
Litigation and regulatory issues* .......... (62) 78 (682)
Settlement of insurance claims for
environmental remediation costs
and damages .............................. - - 105
Caltex write-off of
start-up costs (SOP98-5) ................. - - (25)
--------------------------------
81 78 (602)
--------------------------------
Total special items, after tax .............. $(252) $(216) $(606)
===============================================================================
* 1999 and 1998 include effects related to Cities Service litigation.
In accordance with its policy, the company recorded impairments of assets
to be held and used when changes in circumstances - primarily related to lower
oil and gas prices, downward revisions of reserves and changes in the use of the
assets - indicated that the carrying values of the assets could not be recovered
through estimated future before-tax undiscounted cash flows. Asset impairments
included in asset write-offs and revaluations were for assets held for use,
except for U.S. coal assets, which were held for sale for approximately one year
during 1998 and 1999. In late 1999, these assets were reclassified to held for
use upon cessation of negotiations with potential buyers.
The aggregate income statement effects from special items are reflected in
the following table, including Chevron's proportionate share of special items
related to equity affiliates.
Year ended December 31
------------------------------
2000 1999 1998
-----------------------------------------------------------------------------
Revenues and other income
Income from equity affiliates ............... $ (70) $ 30 $ (101)
Other income ................................ 350 353 47
------------------------------
Total revenues and other income ............. 280 383 (54)
------------------------------
Costs and other deductions
Purchased crude oil and products ............ (5) (1) 66
Operating expenses .......................... 285 344 23
Selling, general and administrative
expenses ................................... 130 (19) 799
Depreciation, depletion and amortization .... 121 427 82
------------------------------
Total costs and other deductions ............ 531 751 970
------------------------------
Income before income tax expense ............ (251) (368) (1,024)
Income tax expense .......................... (1) 152 418
------------------------------
Net income .................................. $ (252) $(216) $ (606)
=============================================================================
Other financial information is as follows:
Year ended December 31
----------------------------
2000 1999 1998
-----------------------------------------------------------------------------
Total financing interest and debt costs ...... $ 492 $ 481 $ 444
Less: capitalized interest ................... 32 9 39
----------------------------
Interest and debt expense .................... 460 472 405
Research and development expenses ............ 171 182 187
Foreign currency gains (losses)* ............. $ 142 $ (38) $ (47)
=============================================================================
* Includes $69, $(15) and $(68) in 2000, 1999, and 1998, respecitvely, for
the company's shares of affiliates' foreign currency gains (losses).
The excess of current cost (based on average acquisition costs for the year)
over the carrying value of inventories for which the LIFO method is used was
$1,977, $871 and $584 at December 31, 2000, 1999 and 1998, respectively.
At December 31, 1999, a liability of $85 remained for employee termination
benefits relating to the restructuring charge recorded during the year. During
2000, these amounts were paid, all employee terminations were completed and no
significant adjustments were required for amounts previously accrued.
FS-19
Note 4. CUMULATIVE EFFECT ON NET INCOME FROM ACCOUNTING CHANGES
In April 1998, The American Institute of Certified Public Accountants (AICPA)
released Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities"(SOP98-5), which introduced a broad definition of items to expense as
incurred for start-up activities, including new products/services, entering new
territories, initiating new processes or commencing new operations. Chevron was
substantially in compliance with the pronouncement. However, Caltex capitalized
these types of costs for certain projects. Chevron recorded its $25 share of the
charge associated with Caltex's 1998 implementation of SOP 98-5, effective
January 1, 1998.
Also in 1998, Chevron changed its method of calculating certain Canadian
deferred income taxes, effective January 1, 1998. The benefit from this change
was $32.
The net benefit to Chevron's 1998 net income from the cumulative effect of
adopting SOP 98-5 by Caltex and the change in Chevron's method of calculating
Canadian deferred taxes was immaterial.
Note 5. INFORMATION RELATING TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
The major components of "Capital expenditures" and the reconciliation of this
amount to the capital and exploratory expenditures, excluding equity in
affiliates, presented in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" are presented in the following table.
Year ended December 31
------------------------------
2000 1999 1998
-------------------------------------------------------------------------------------
Additions to properties,
plant and equipment ................................ $ 2,917 $ 5,018 $ 3,678
Additions to investments ............................ 775 449 306
Payments for other liabilities
and assets, net(1).................................. (35) (1,101) (104)
------------------------------
Capital expenditures ................................ 3,657 4,366 3,880
Expensed exploration expenditures ................... 512 413 438
Payments of long-term debt
and other financing obligations(2).................. 17 572 2
------------------------------
Capital and exploratory expenditures,
excluding equity affiliates ........................ $ 4,186 $ 5,351 $ 4,320
=====================================================================================
(1)1999 includes liabilities assumed in acquisitions of Rutherford-Moran Oil
Corporation and Petrolera Argentina San Jorge S.A.
(2) 1999 includes obligations assumed in acquisition of Rutherford-Moran Oil
Corporation and other capital lease additions.
The consolidated statement of cash flows excludes the following significant
noncash transactions:
Chevron contributed $2,800 of net noncash assets to Chevron Phillips
Chemical Company LLC in 2000, as described in Note 2. The investment is
accounted for under the equity method.
During 1999, the company acquired the Rutherford-Moran Oil Corporation and
Petrolera Argentina San Jorge S.A. Only the net cash component of these
transactions is included as "Capital expenditures." Consideration for the
Rutherford-Moran transaction included 1.1 million shares of the company's
treasury stock valued at $91.
In 2000, $210 was reclassified from "Deferred credits and other noncurrent
obligations" to "Accrued liabilities." The payment was remitted in January 2001.
Note 6. SUMMARIZED FINANCIAL DATA - CHEVRON U.S.A. INC.
At December 31, 2000, Chevron U.S.A. Inc. was Chevron's principal operating
company, consisting primarily of its U.S. integrated petroleum operations
(excluding most of the domestic pipeline operations). Through the first half of
2000, these operations were conducted primarily by three divisions: Chevron
U.S.A. Production Company, Chevron Products Company and Chevron Chemical Company
LLC. As described in Note 2, Chevron combined most of its petrochemicals
businesses with those of Phillips Petroleum Company on July 1, 2000. Summarized
financial information for Chevron U.S.A. Inc. and its consolidated subsidiaries
is presented below.
Year ended December 31
------------------------------
2000 1999 1998
-------------------------------------------------------------------------------------
Sales and other operating revenues .................. $40,729 $28,957 $24,440
Total costs and other deductions .................... 37,528 28,329 24,338
Net income .......................................... 2,336 885 346
=====================================================================================
At December 31
---------------------------
2000 1999*
---------------------------------------------------------------
Current assets $ 4,396 $ 3,889
Other assets 20,738 20,687
Current liabilities 4,094 4,685
Other liabilities 10,251 9,730
Net equity 10,789 10,161
===============================================================
Memo: Total Debt $ 6,728 $ 7,462
*Certain asset and liability accounts have been restated. Net equity remains
unchanged.
FS-20
Note 7. SUMMARIZED FINANCIAL DATA - CHEVRON TRANSPORT CORPORATION LIMITED
Effective July 1999, Chevron Transport Corporation, a Liberian corporation, was
merged into Chevron Transport Corporation Limited (CTC), a Bermuda corporation,
which assumed all of the assets and liabilities of Chevron Transport
Corporation. CTC is an indirect, wholly owned subsidiary of Chevron Corporation.
CTC is the principal operator of Chevron's international tanker fleet and is
engaged in the marine transportation of oil and refined petroleum products. Most
of CTC's shipping revenue is derived by providing transportation services to
other Chevron companies. Chevron Corporation has guaranteed this subsidiary's
obligations in connection with certain debt securities issued by a third party.
Summarized financial information for CTC and its consolidated subsidiaries is
presented below.
Year ended December 31
------------------------
2000 1999 1998
------------------------------------------------------------------------------
Sales and other operating revenues ................. $ 728 $ 504 $ 573
Total costs and other deductions ................... 777 572 580
Net (loss) income .................................. (47) (50) 17
==============================================================================
At December 31
-------------------
2000 1999
--------------------------------------------------------------
Current assets $205 $184
Other assets 530 742
Current liabilities 309 580
Other liabilities 361 264
Net equity 65 82
==============================================================
This information was derived from the financial statements prepared on a
stand-alone basis in conformity with generally accepted accounting principles.
In 2000, CTC's parent made an additional $30 capital contribution. There were no
restrictions on CTC's ability to pay dividends or make loans or advances at
December 31, 2000.
Note 8. STOCKHOLDERS' EQUITY
Retained earnings at December 31, 2000 and 1999, include $2,301 and $2,048,
respectively, for the company's share of undistributed earnings of equity
affiliates.
In 1998, the company declared a dividend distribution of one Right to
purchase Chevron Participating Preferred Stock. The Rights become exercisable,
unless redeemed earlier by the company, if a person or group acquires, or
obtains the right to acquire, 10 percent or more of the outstanding shares of
common stock, or commences a tender or exchange offer that would result in
acquiring 10 percent or more of the outstanding shares of common stock, either
event occurring without the prior consent of the company. The Chevron Series A
Participating Preferred Stock that the holder of a Right is entitled to receive
and the purchase price payable upon exercise of the Chevron Right are both
subject to adjustment. The person or group who had acquired 10 percent or more
of the outstanding shares of common stock without the prior consent of the
company would not be entitled to this purchase.
In October 2000, the Stockholder Rights agreement was amended to modify the
10 percent thresholds discussed above to 20 percent if the acquiring person is
Texaco Corporation.
The Rights will expire in November 2008, or they may be redeemed by the
company at 1 cent per Right prior to that date. The Rights do not have voting or
dividend rights and, until they become exercisable, have no dilutive effect on
the earnings per share of the company. Five million shares of the company's
preferred stock have been designated Series A Participating Preferred Stock and
reserved for issuance upon exercise of the Rights. No event during 2000 made the
Rights exercisable.
At December 31, 2000, 30 million shares of the company's authorized but
unissued common stock were reserved for the issuance of shares under the
Long-Term Incentive Plan (LTIP), which was approved by the stockholders in 1990.
To date, all of the plan's common stock requirements have been met from the
company's Treasury Stock, and there have been no issuances of reserved shares.
Note 9. FINANCIAL AND DERIVATIVE INSTRUMENTS
Off-Balance-Sheet Risk
The company utilizes a variety of derivative instruments, both financial and
commodity-based, as hedges to manage a small portion of its exposure to price
volatility stemming from its integrated petroleum activities. Relatively
straightforward and involving little complexity, the derivative instruments
consist mainly of futures contracts traded on the New York Mercantile Exchange
and the International Petroleum Exchange and of both crude and natural gas
swap contracts entered into principally with major financial institutions.
The futures contracts hedge anticipated crude oil purchases and sales and
product sales, generally forecasted to occur within a 60- to 90-day period.
Crude oil swaps are used to hedge sales forecasted to occur within the next
three years. The terms of the swap contracts have maturities of the same period.
Natural gas swaps are used primarily to hedge firmly committed sales, and the
terms of the swap contracts held at year-end 2000 had an average remaining
maturity of 43 months. Gains and losses on these derivative instruments offset
and are recognized in income concurrently with the recognition of the underlying
physical transactions.
The company enters into forward exchange contracts, generally with terms of
90 days or less, as a hedge against some of its foreign currency exposures,
primarily anticipated purchase transactions forecasted to occur within 90 days.
The company enters into interest rate swaps as part of its overall strategy
to manage the interest rate risk on its debt. Under the terms of the swaps, net
cash settlements, based on the difference between fixed-rate and floating-rate
interest amounts calculated by reference to agreed notional principal amounts,
are made semiannually and are recorded monthly as "Interest and debt expense."
At December 31, 2000, there were no outstanding contracts.
FS-21
Note 9. FINANCIAL AND DERIVATIVE INSTRUMENTS
- - Continued
Concentrations of Credit Risk
The company's financial instruments that are exposed to concentrations of
credit risk consist primarily of its cash equivalents, marketable securities,
derivative financial instruments and trade receivables.
The company's short-term investments are placed with a wide array of
financial institutions with high credit ratings. This diversified investment
policy limits the company's exposure both to credit risk and to concentrations
of credit risk. Similar standards of diversity and creditworthiness are applied
to the company's counterparties in derivative instruments.
The trade receivable balances, reflecting the company's diversified sources
of revenue, are dispersed among the company's broad customer base worldwide. As
a consequence, concentrations of credit risk are limited. The company routinely
assesses the financial strength of its customers. Letters of credit, or
negotiated contracts when the financial strength of a customer is not considered
sufficient, are the principal securities obtained to support lines of credit.
Fair Value
Fair values are derived either from quoted market prices or, if not available,
the present value of the expected cash flows. The fair values reflect the cash
that would have been received or paid if the instruments were settled at
year-end. The fair values of the financial and derivative instruments at
December 31, 2000 and 1999, are described below.
Long-term debt of $2,147 and $2,449 had estimated fair values of $2,167 and
$2,430.
The notional principal amount of the interest rate swap for 1999 totaled
$350, with an approximate fair value of $11. The notional amounts of derivative
instruments do not represent assets or liabilities of the company but, rather,
are the basis for the settlements under the contract terms.
The company holds cash equivalents and U.S. dollar marketable securities in
domestic and offshore portfolios. Eurodollar bonds, floating-rate notes, time
deposits and commercial paper are the primary instruments held. Cash equivalents
and marketable securities had fair values of $2,301 and $1,762. Of these
balances, $1,567 and $1,075 classified as cash equivalents had average
maturities under 90 days, while the remainder, classified as marketable
securities, had average maturities of approximately three years.
For other derivatives the contract or notional values were as follows:
Crude oil and products futures had net contract values of $10 and $143. Forward
exchange contracts had contract values of $154 and $123. Gas swap contracts are
based on notional gas volumes of approximately 39 and 44 billion cubic feet.
Crude oil swap contracts are based on notional crude volumes of approximately 11
million barrels. Fair values for all of these derivatives were not material in
2000 and 1999. Deferred gains and losses that were accrued on the consolidated
balance sheet were not material.
Note 10. 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. The
remainder of the company's operations is reported as International (outside the
United States), since its activities in no other country meet the requirements
for separate disclosure.
Segment Earnings
The company evaluates the performance of its operating segments on an after-tax
basis, without considering the effects of debt financing interest expense or
investment interest income, both of which are managed by the corporation on a
worldwide basis. Corporate administrative costs and assets are not allocated to
the operating segments; instead, operating segments are billed only for direct
corporate services. Nonbillable costs remain as corporate center expenses.
After-tax segment operating earnings are presented in the following table.
Year ended December 31
------------------------------
2000 1999 1998
---------------------------------------------------------
EXPLORATION AND PRODUCTION
United States* ......... $ 1,889 $ 482 $ 330
International .......... 2,602 1,093 707
------------------------------
TOTAL EXPLORATION
AND PRODUCTION ......... 4,491 1,575 1,037
------------------------------
REFINING, MARKETING
AND TRANSPORTATION
United States .......... 549 357 572
International .......... 104 74 28
------------------------------
TOTAL REFINING, MARKETING
AND TRANSPORTATION ..... 653 431 600
------------------------------
CHEMICALS
United States .......... (31) 44 79
International .......... 71 65 43
------------------------------
TOTAL CHEMICALS ......... 40 109 122
------------------------------
TOTAL SEGMENT INCOME .... 5,184 2,115 1,759
------------------------------
Interest Expense ........ (317) (333) (270)
Interest Income ......... 89 21 63
Other * ................. 229 267 (213)
------------------------------
NET INCOME .............. $ 5,185 $ 2,070 $ 1,339
==============================
NET INCOME - UNITED STATES $ 2,469 $ 976 $ 642
NET INCOME - INTERNATIONAL $ 2,716 $ 1,094 $ 697
------------------------------
TOTAL NET INCOME ....... $ 5,185 $ 2,070 $ 1,339
==============================
*1999 and 1998 conformed to reflect change to Other for equity earnings in
Dynegy Inc.
FS-22
Note 10. OPERATING SEGMENTS AND GEOGRAPHIC DATA - Continued
Segment Assets
Segment assets do not include intercompany investments or intercompany
receivables. "All Other" assets consist primarily of worldwide cash and
marketable securities, company real estate, information systems, Dynegy Inc.
investment and coal mining operations. Segment assets at year-end 2000 and 1999
follow:
At December 31
-------------------
2000 1999
------------------------------------------------
EXPLORATION AND PRODUCTION
United States* .......... $ 5,568 $ 5,215
International ........... 14,493 13,748
-------------------
TOTAL EXPLORATION
AND PRODUCTION .......... 20,061 18,963
-------------------
REFINING, MARKETING
AND TRANSPORTATION
United States ........... 8,365 8,178
International ........... 3,941 3,609
-------------------
TOTAL REFINING, MARKETING
AND TRANSPORTATION ...... 12,306 11,787
-------------------
CHEMICALS
United States ........... 2,342 3,303
International ........... 728 923
-------------------
TOTAL CHEMICALS .......... 3,070 4,226
-------------------
TOTAL SEGMENT ASSETS ..... 35,437 34,976
-------------------
ALL OTHER
United States* .......... 4,398 3,825
International ........... 1,429 1,867
-------------------
TOTAL All OTHER .......... 5,827 5,692
-------------------
TOTAL ASSETS - UNITED STATES 20,673 20,521
TOTAL ASSETS - INTERNATIONAL 20,591 20,147
-------------------
TOTAL ASSETS ............ $41,264 $40,668
===================
*Conformed to 2000 presentation of the company's investment in Dynegy Inc.
in All Other.
Segment Sales and Other Operating Revenues
Revenues for the exploration and production segment are derived primarily from
the production of crude oil and natural gas. Revenues for the refining,
marketing and transportation segment are derived from the refining and marketing
of petroleum products such as gasoline, jet fuel, gas oils, kerosene, residual
fuel oils and other products derived from crude oil. This segment also generates
revenues from the transportation and trading of crude oil and refined products.
Prior to the July 2000 formation of the Chevron Phillips joint venture,
chemicals segment revenues were derived from the manufacture and sale of
petrochemicals, plastic resins, and lube oil and fuel additives. Subsequently,
only revenues from the manufacture and sale of lube oil and fuel additives were
included.
"All Other" activities include corporate administrative costs, worldwide
cash management and debt financing activities, coal mining operations, insurance
operations, and real estate activities.
Reportable operating segment sales and other operating revenues, including
internal transfers, for the years 2000, 1999 and 1998 are presented in the
following table. Sales from the transfer of products between segments are at
estimated market prices.
Year ended December 31
---------------------------------
2000 1999 1998
------------------------------------------------------------------
EXPLORATION AND PRODUCTION
United States
Natural gas .................. $ 2,701 $ 1,578 $ 1,599
Natural gas liquids .......... 266 159 128
Other ........................ 12 8 12
Intersegment ................. 3,213 1,985 1,453
--------------------------------
Total United States .......... 6,192 3,730 3,192
--------------------------------
International
Crude oil .................... 4,285 2,586 1,761
Natural gas .................. 914 678 505
Natural gas liquids .......... 234 116 89
Other ........................ 296 207 131
Intersegment ................. 4,685 2,876 1,984
--------------------------------
Total International .......... 10,414 6,463 4,470
--------------------------------
TOTAL EXPLORATION
AND PRODUCTION ............ 16,606 10,193 7,662
--------------------------------
REFINING, MARKETING
AND TRANSPORTATION
United States
Refined products ............. 19,095 12,765 10,148
Crude oil .................... 6,088 3,618 2,971
Natural gas liquids .......... 274 133 100
Other ........................ 770 654 622
Excise taxes ................. 3,837 3,702 3,503
Intersegment ................. 341 366 216
--------------------------------
Total United States .......... 30,405 21,238 17,560
--------------------------------
International
Refined products ............. 1,386 975 1,312
Crude oil .................... 6,702 3,874 3,049
Natural gas liquids .......... 39 24 5
Other ........................ 385 248 299
Excise taxes ................. 196 178 213
Intersegment ................. 18 16 20
--------------------------------
Total International .......... 8,726 5,315 4,898
--------------------------------
TOTAL REFINING, MARKETING
AND TRANSPORTATION ........ 39,131 26,553 22,458
--------------------------------
CHEMICALS
United States
Products ..................... 1,986 2,794 2,468
Excise taxes ................. 1 2 2
Intersegment ................. 137 162 121
--------------------------------
Total United States .......... 2,124 2,958 2,591
--------------------------------
International
Products ..................... 735 715 568
Other ........................ 36 35 18
Excise taxes ................. 26 28 38
Intersegment ................. - 1 1
--------------------------------
Total International .......... 797 779 625
--------------------------------
TOTAL CHEMICALS ............ 2,921 3,737 3,216
--------------------------------
ALL OTHER
United States - Coal .......... 279 360 399
United States - Other ......... 43 8 (1)
International ................. 6 3 4
Intersegment - United States .. 90 55 52
Intersegment - International .. 10 4 2
--------------------------------
TOTAL ALL OTHER ............ 428 430 456
--------------------------------
Segment Sales and
Other Operating Revenues
- United States .... 39,133 28,349 23,793
- International .... 19,953 12,564 9,999
--------------------------------
Total Segment Sales and
Other Operating Revenues ..... 59,086 40,913 33,792
--------------------------------
Elimination of Intersegment Sales (8,494) (5,465) (3,849)
--------------------------------
Total Sales and
Other Operating Revenues ..... $ 50,592 $ 35,448 $ 29,943
================================
FS-23
Segment Income Taxes
Segment income tax expenses for the years 2000, 1999 and 1998 are as follows:
Year ended December 31
-----------------------------
2000 1999 1998
--------------------------------------------------------
EXPLORATION AND PRODUCTION
United States* ........ $ 1,074 $ 260 $ 161
International ......... 2,701 1,341 595
-----------------------------
TOTAL EXPLORATION
AND PRODUCTION ........ 3,775 1,601 756
-----------------------------
REFINING, MARKETING
AND TRANSPORTATION
United States ......... 248 135 309
International ......... 19 41 54
-----------------------------
TOTAL REFINING, MARKETING
AND TRANSPORTATION .... 267 176 363
-----------------------------
CHEMICALS
United States ......... 31 (13) 25
International ......... 30 45 14
-----------------------------
TOTAL CHEMICALS ........ 61 32 39
-----------------------------
All Other* ............ (18) (231) (663)
-----------------------------
TOTAL INCOME TAX EXPENSE $ 4,085 $ 1,578 $ 495
=============================
*1999 and 1998 conformed to reflect change to All Other for the company's
investment in Dynegy Inc.
Other Segment Information
Major equity affiliates are aligned for segment reporting as follows: P.T.
Caltex Pacific Indonesia (CPI) and Tengizchevroil (TCO) - International
exploration and production; Caltex Corporation - International refining,
marketing and transportation; Chevron Phillips Chemical Company LLC - U.S.
Chemicals; and Dynegy Inc. - All Other. Additional information for equity
affiliates is in Note 13. Information related to properties, plant and equipment
by segment is in Note 14.
Note 11. 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 September 1998 District
Court 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. In February 2001, the
Supreme Court denied the petition to review the lower court's ruling. The
defendants are pursuing other legal alternatives to have Unocal's patent ruled
invalid.
If Unocal's patent ultimately is upheld, the company's financial exposure
includes royalties, plus interest, for production of gasoline that is proven to
have infringed the patent. As a result of the March 2000 ruling, the company
recorded a special after-tax charge of $62. 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 Chevron modified its
manufacturing processes to minimize the production of gasoline that allegedly
infringed on Unocal's patented formulations. Subsequently, the company has been
accruing 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 to Unocal - $17.2 for the original court judgment
for California gasoline produced in violation of Unocal's patent from March
through July 1996 and $5.5 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.
Note 12. LEASE COMMITMENTS
Certain noncancelable leases are classified as capital leases, and the leased
assets are included as part of "Properties, plant and equipment. "Other leases
are classified as operating leases and are not capitalized. Details of the
capitalized leased assets are as follows:
At December 31
-------------------------
2000 1999
---------------------------------------------------------------
Exploration and Production ......... $ 93 $ 86
Refining, Marketing and Transportation 754 779
-------------------------
Total ............................. 847 865
Less: accumulated amortization ..... 429 425
-------------------------
Net capitalized leased assets ...... $418 $440
=========================
Rental expenses incurred for operating leases during 2000, 1999 and 1998
were as follows:
Year ended December 31
---------------------------------
2000 1999 1998
--------------------------------------------------------------
Minimum rentals ......... $702 $465 $503
Contingent rentals ...... 3 3 5
---------------------------------
Total .................. 705 468 508
Less: sublease rental income 2 3 3
---------------------------------
Net rental expense ...... $703 $465 $505
=================================
Contingent rentals are based on factors other than the passage of time,
principally sales volumes at leased service stations. Certain leases include
escalation clauses for adjusting rentals to reflect changes in price indices,
renewal options ranging from 1 to 25 years, and/or options to purchase the
leased property during or at the end of the initial lease period for the fair
market value at that time.
At December 31, 2000, the future minimum lease payments under operating and
capital leases were as follows:
FS-24
At December 31
---------------------------
Operating Capital
Leases Leases
----------------------------------------------------------------------
Year: 2001 ............................. $ 220 $ 77
2002 ............................. 247 72
2003 ............................. 218 103
2004 ............................. 213 46
2005 ............................. 207 41
Thereafter ....................... 424 762
---------------------------
Total ................................. $1,529 $1,101
=============================================================---------
Less: amounts representing interest
and executory costs ................... 483
---------------------------
Net present values ..................... 618
Less: capital lease obligations
included in short-term debt ........... 337
---------------------------
Long-term capital lease obligations .... $ 281
---------------------------
Future sublease rental income .......... $ 32 $ -
===========================
Note 13. INVESTMENTS AND ADVANCES
Chevron owns 50 percent each of P.T. Caltex Pacific Indonesia (CPI), an
exploration and production company operating in Indonesia; Caltex Corporation,
which, through its subsidiaries and affiliates, conducts refining and marketing
activities in Asia, Africa, the Middle East, Australia and New Zealand; and
American Overseas Petroleum Limited, which, through its subsidiary, manages
certain of the company's operations in Indonesia. These companies and their
subsidiaries and affiliates are collectively called the Caltex Group.
The company received dividends and distributions of $596, $268 and $254 in
2000, 1999 and 1998, respectively, including $244, $212 and $167 from the Caltex
group.
Tengizchevroil (TCO) is a joint venture formed in 1993 to develop the
Tengiz and Korolev oil fields in Kazakhstan over a 40-year period. Chevron's
ownership was 45 percent for the 1998 to 2000 period. Upon formation of the
joint venture, the company incurred an obligation of $420, payable to the
Republic of Kazakhstan upon attainment of a dedicated export system with the
capability of the greater of 260,000 barrels of oil per day or TCO's production
capacity. In January 2001, the company purchased an additional 5 percent of TCO.
As a part of that transaction, the company paid $210 of the $420 obligation. The
$420 was also included in the carrying value of the original investment, as the
company believed, beyond a reasonable doubt, that its full payment would be
made.
At year-end 2000, Chevron owned 26.5 percent of Dynegy Inc., a gatherer,
processor, transporter and marketer of energy products in North America and the
United Kingdom. These products include natural gas, natural gas liquids, crude
oil and electricity. Chevron's percentage ownership in Dynegy was reduced from
about 28 percent during 2000, as a result of a Dynegy 10 million-share equity
offering (at about $53 per share), in which Chevron did not participate. The
market value of Chevron's share of Dynegy common stock at December 31, 2000, was
$4,784, based on closing market prices.
Chevron owns 50 percent of Chevron Phillips Chemical Company LLC, formed in
July 2000 when the company merged most of its petrochemicals businesses with
those of Phillips Petroleum Company. This business is described in more detail
in Note 2.
The company's transactions with affiliated companies are summarized in the
table that follows. These are primarily for the purchase of Indonesian crude oil
from CPI, the sale of crude oil and products to Caltex Corporation's refining
and marketing companies, the sale of natural gas to Dynegy, and the purchase of
natural gas and natural gas liquids from Dynegy.
Year ended December 31
-------------------------
2000 1999 1998
-----------------------------------------------------------------
Sales to Caltex Group ................ $1,452 $ 687 $ 772
Sales to Dynegy Inc. ................. 2,451 1,407 1,307
Sales to Fuel & Marine Marketing LLC* 250 234 22
Sales to Chevron Phillips ............ 158 - -
Sales to other affiliates ............ 21 12 4
-------------------------
Total sales to affiliates ........... $4,332 $2,340 $2,105
=========================
Purchases from Caltex Group .......... $1,247 $ 867 $ 681
Purchases from Dynegy Inc. ........... 524 785 642
Purchases from Chevron Phillips ...... 111 - -
Purchases from other affiliates ...... 35 6 2
-------------------------
Total purchases from affiliates $1,917 $1,658 $1,325
=========================
*Affiliate formed in November 1998; owned 31 percent by Chevron.
Equity in earnings, together with investments in and advances to companies
accounted for using the equity method, and other investments accounted for at or
below cost, are as follows:
Investments and Advances Equity in Earnings
-------------------------------------------------------
At December 31 Year ended December 31
-------------------------------------------------------
2000 1999* 2000 1999* 1998*
- ------------------------------------------------------------------------------------
Exploration and Production
Tengizchevroil ........ $1,857 $1,722 $ 376 $ 177 $ 60
Caltex Group .......... 465 455 255 139 107
Other ................. 246 198 48 32 4
-------------------------------------------------------
Total Exploration
and Production ....... 2,568 2,375 679 348 171
-------------------------------------------------------
Refining, Marketing
and Transportation
Caltex Group .......... 1,681 1,683 4 56 (36)
Other ................. 771 379 86 70 24
-------------------------------------------------------
Total Refining,
Marketing and
Transportation ....... 2,452 2,062 90 126 (12)
-------------------------------------------------------
Chemicals
Chevron Phillips ........ 1,830 - (114) - -
Other Chemical .......... 15 145 (9) 1 -
-------------------------------------------------------
Total Chemicals ......... 1,845 145 (123) 1 -
-------------------------------------------------------
Dynegy Inc. .............. 929 351 127 51 49
All Other ................ 24 31 (23) - 20
-------------------------------------------------------
Total Equity Method ..... $7,818 $4,964 $ 750 $ 526 $ 228
----------------------------
Other at or Below Cost 289 267
-------------------------
Total Investments and
Advances $8,107 $5,231
-------------------------------------------------------
Total U.S. $3,249 $ 817 $ 73 $ 130 $ 91
Total International $4,858 $4,414 $ 677 $ 396 $ 137
=======================================================
*1999 and 1998 reclassified to conform to the 2000 presentation.
"Accounts and notes receivable" in the consolidated balance sheet include
$494 and $277 at December 31, 2000 and 1999, respectively, of amounts due from
affiliated companies. "Accounts payable" include $139 and $53 at December 31,
2000 and 1999, respectively, of amounts due to affiliated companies.
FS-25
Caltex Group Other Affiliates Chevron's Share
-------------------------------------------------------------------------------------
Year ended December 31 2000 1999(1) 1998(1) 2000 1999 1998 2000 1999(1) 1998(1)
- --------------------------------------------------------------------------------------------------------------------------
Total revenues $20,372 $15,274 $11,727 $40,812 $20,645 $16,842 $22,526 $13,840 $ 11,305
Total costs and other deductions 19,284 14,494 11,208 38,951 19,805 16,430 21,287 13,043 10,783
Net income 519 390 143 1,280 610 295 750 526 228
===========================================================================================================================
Caltex Group Other Affiliates Chevron's Share
--------------------------------------------------------------------------------------
At December 31 2000 1999(2) 1998 2000 1999 1998 2000 1999(2) 1998
- ---------------------------------------------------------------------------------------------------------------------------
Current assets $ 2,544 $ 2,705 $ 1,974 $14,153 $ 4,640 $ 3,326 $ 5,761 $ 2,850 $ 2,015
Other assets 7,678 7,632 7,683 24,124 10,255 8,868 11,914 7,135 6,663
Current liabilities 3,385 3,395 2,840 11,870 3,709 2,723 4,971 2,665 2,162
Other liabilities 2,543 2,667 2,420 17,161 8,362 7,147 4,886 2,356 2,126
Net equity 4,294 4,275 4,397 9,246 2,824 2,324 7,818 4,964 4,390
===========================================================================================================================
(1)Total revenues and costs and other deductions have been restated to conform with 2000 presentation.
(2)Classification of current and other assets restated. Total assets unchanged.
NOTE 14. PROPERTIES, PLANT AND EQUIPMENT
At December 31 Year ended December 31
---------------------------------------------------- -------------------------------------------
Gross Investment at Cost Net Investment : Additions at Cost(1) Depreciation Expense
------------------------- ------------------------ ------------------- ---------------------
2000 1999 1998 2000 1999 1998 : 2000 1999 1998 2000 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Exploration and Production
United States $17,909 $17,947 $18,372 $ 4,699 $ 4,709 $ 5,237 :$ 972 $ 710 $1,000 $ 985 $1,130 $ 818
International 16,901 15,876 12,755 9,509 9,465 7,148 : 1,166 3,251 1,221 1,093 851 730
- -----------------------------------------------------------------------------------------------------------------------------------
Total Exploration :
and Production 34,810 33,823 31,127 14,208 14,174 12,385 : 2,138 3,961 2,221 2,078 1,981 1,548
- -----------------------------------------------------------------------------------------------------------------------------------
Refining, Marketing :
and Transportation :
United States 12,044 12,025 11,793 5,974 6,196 6,268 : 467 515 665 504 478 483
International 1,662 1,838 2,005 900 1,030 1,139 : 36 30 50 64 79 81
- -----------------------------------------------------------------------------------------------------------------------------------
Total Refining, Marketing :
and Transportation 13,706 13,863 13,798 6,874 7,226 7,407 : 503 545 715 568 557 564
- -----------------------------------------------------------------------------------------------------------------------------------
Chemicals(2)
United States 604 3,689 3,436 339 2,354 2,211 : 78 326 385 76 174 109
International 671 714 662 394 453 414 : 42 59 116 19 19 10
- -----------------------------------------------------------------------------------------------------------------------------------
Total Chemicals 1,275 4,403 4,098 733 2,807 2,625 : 120 385 501 95 193 119
- -----------------------------------------------------------------------------------------------------------------------------------
All Other(3) 2,117 2,123 2,314 1,079 1,110 1,312 : 121 103 202 107 135 89
- -----------------------------------------------------------------------------------------------------------------------------------
Total United States 32,673 35,783 35,915 12,091 14,369 15,028 : 1,638 1,654 2,252 1,672 1,917 1,499
Total International 19,235 18,429 15,422 10,803 10,948 8,701 : 1,244 3,340 1,387 1,176 949 821
- -----------------------------------------------------------------------------------------------------------------------------------
Total $51,908 $54,212 $51,337 $22,894 $25,317 $23,729 :$2,882 $4,994 $3,639 $2,848 $2,866 $2,320
===================================================================================================================================
(1)Net of dry hole expense related to prior years' expenditures of $52, $125 and
$40 in 2000, 1999 and 1998, respectively.
(2)See Note 2 regarding the 2000 formation of the Chevron Phillips joint
venture.
(3)Primarily coal and real estate assets and management information systems.
FS-26
Note 15. TAXES
U.S. federal income tax expense was reduced by $103, $89, $84 in 2000, 1999 and
1998, respectively, for low-income housing and other business tax credits.
In 2000, before-tax income, including related corporate and other charges,
for U.S. operations was $3,924, compared with $1,254 in 1999 and $728 in 1998.
For international operations, before-tax income was $5,346, $2,394 and $1,106 in
2000, 1999 and 1998, respectively.
Year ended December 31
-----------------------------
2000 1999 1998
------------------------------------------------------
Taxes on income
U.S. federal
Current ............ $ 957 $ 135 $ (176)
Deferred ........... 276 145 71
State and local ...... 186 (14) 20
-----------------------------
Total United States 1,419 266 (85)
-----------------------------
International
Current ............ 2,534 1,231 385
Deferred ........... 132 81 195
-----------------------------
Total International 2,666 1,312 580
-----------------------------
Total taxes on income $ 4,085 $ 1,578 $ 495
=============================
The company's effective income tax rate varied from the U.S. statutory
federal income tax rate because of the following:
Year ended December 31
-------------------------------
2000 1999 1998
-------------------------------------------------------------------------
U.S. statutory federal income tax rate 35.0% 35.0% 35.0%
Effect of income taxes from international
operations in excess of taxes at the
U.S. statutory rate ................. 8.9 15.6 7.6
State and local taxes on income, net
of U.S. federal income tax benefit... 1.3 (0.2) 0.2
Prior-year tax adjustments ............ 0.6 - (4.5)
Tax credits ........................... (1.1) (2.4) (4.6)
Other ................................. (0.6) (2.2) (6.4)
------------------------------
Consolidated companies ............. 44.1 45.8 27.3
Effect of recording equity in income
of certain affiliated companies
on an after-tax basis ............... - (2.5) (0.3)
------------------------------
Effective tax rate ................. 44.1% 43.3% 27.0%
========================================================================
The increase in the 1999 effective tax rate from 1998 was due primarily to
increased foreign taxes on higher foreign earnings in 1999 compared with 1998.
Additional increases in the effective tax rate in 1999 were from tax credits as
a smaller proportion of before-tax income in 1999 than in 1998. The other
effects on the 1999 effective tax rate included settlement of outstanding
issues, utilization of additional capital loss benefits and permanent
differences, slightly offset by the effect of lower taxable income received from
equity affiliates in 1999.
The company records its deferred taxes on a tax-jurisdiction basis and
classifies those net amounts as current or noncurrent based on the balance sheet
classification of the related assets or liabilities.
The reported deferred tax balances are composed of the following deferred
tax liabilities (assets).
At December 31
--------------------
2000 1999
----------------------------------------------------------
Properties, plant and equipment ..... $ 5,230 $ 5,800
Inventory ........................... 43 149
Investments and other ............... 1,020 190
--------------------
Total deferred tax liabilities ..... 6,293 6,139
--------------------
Abandonment/environmental reserves .. (791) (611)
Employee benefits ................... (548) (611)
AMT/other tax credits ............... (314) (588)
Other accrued liabilities ........... (43) (195)
Miscellaneous ....................... (421) (316)
--------------------
Total deferred tax assets .......... (2,117) (2,321)
--------------------
Deferred tax assets valuation
allowance ......................... 315 452
--------------------
Total deferred taxes, net .......... $ 4,491 $ 4,270
============================================================
Investments and other for 2000 in the table above include deferred tax
liabilities of $805 for investments, of which $482 is associated with the
company's investment in Chevron Phillips Chemical Company. In 1999, most of the
deferred tax liabilities associated with the company's assets contributed to the
joint venture were reported as properties, plant and equipment.
At December 31, 2000 and 1999, deferred taxes were classified in the
consolidated balance sheet as follows:
At December 31
--------------------
2000 1999
------------------------------------------------------------
Prepaid expenses and other current assets $ (118) $ (546)
Deferred charges and other assets ..... (299) (195)
Federal and other taxes on income ..... - 1
Noncurrent deferred income taxes ...... 4,908 5,010
--------------------
Total deferred income taxes, net ..... $ 4,491 $ 4,270
============================================================
It is the company's policy for subsidiaries included in the U.S.
consolidated tax return to record income tax expense as though they filed
separately, with the parent recording the adjustment to income tax expense for
the effects of consolidation.
Undistributed earnings of international consolidated subsidiaries and
affiliates for which no deferred income tax provision has been made for possible
future remittances totaled approximately $5,244 at December 31, 2000.
Substantially all of this amount represents earnings reinvested as part of the
company's ongoing business. It is not practical to estimate the amount of taxes
that might be payable on the eventual remit-
FS-27
tance of such earnings. On remittance, certain countries impose withholding
taxes that, subject to certain limitations, are then available for use as tax
credits against a U.S. tax liability, if any. The company estimates withholding
taxes of approximately $226 would be payable upon remittance of these earnings.
Year ended December 31
--------------------------
2000 1999 1998
-------------------------------------------------------
Taxes other than on income
United States
Excise taxes on products
and merchandise $3,838 $3,704 $3,505
Property and other
miscellaneous taxes 269 272 262
Payroll taxes 98 119 129
Taxes on production 121 94 92
--------------------------
Total United States 4,326 4,189 3,988
--------------------------
International
Excise taxes on products
and merchandise 222 206 251
Property and other
miscellaneous taxes 150 145 137
Payroll taxes 29 32 26
Taxes on production 66 14 9
--------------------------
Total International 467 397 423
--------------------------
Total taxes other
than on income $4,793 $4,586 $4,411
======================================================
Note 16. SHORT-TERM DEBT
Redeemable long-term obligations consist primarily of tax-exempt variable-rate
put bonds that are included as current liabilities because they become
redeemable at the option of the bondholders during the year following the
balance sheet date.
The company periodically enters into interest rate swaps on a portion of
its short-term debt. At December 31, 2000, there were no outstanding contracts.
At December 31, 1999, the company had swapped notional amounts of $350 of
floating rate debt to fixed rates. The effect of these swaps on the company's
interest expense was not material.
At December 31
--------------------
2000 1999
-----------------------------------------------------------------
Commercial paper(1) ........................ $ 2,819 $ 5,265
Current maturities of long-term debt ....... 267 127
Current maturities of long-term
capital leases ........................... 35 35
Redeemable long-term obligations
Long-term debt ............................ 301 301
Capital leases ............................ 302 297
Notes payable .............................. 80 134
--------------------
Subtotal(2)................................ 3,804 6,159
Reclassified to long-term debt ............. (2,725) (2,725)
--------------------
Total short-term debt ..................... $ 1,079 $ 3,434
=================================================================
(1)Weighted-average interest rates at December 31, 2000 and 1999, were 6.6
percent and 6.0 percent, respectively,including the effect of interest rate
swaps.
(2)Weighted-average interest rates at December 31, 2000 and 1999, were 6.4
percent and 5.8 percent respectively,including the effect of interest rate
swaps.
Note 17. LONG-TERM DEBT
Chevron has three "shelf" registrations on file with the Securities and Exchange
Commission that together would permit the issuance of $2,800 of debt securities
pursuant to Rule 415 of the Securities Act of 1933.
At year-end 2000, the company had $3,250 of committed credit facilities
with banks worldwide, $2,725 of which had termination dates beyond one year. The
facilities support the company's commercial paper borrowings. Interest on
borrowings under the terms of specific agreements may be based on the London
Interbank Offered Rate, the Reserve Adjusted Domestic Certificate of Deposit
Rate or bank prime rate. No amounts were outstanding under these credit
agreements during the year or at year-end.
At December 31
--------------------------
2000 1999
--------------------------------------------------------------------
8.11% amortizing notes due 2004(1) $ 540 $ 620
6.625% notes due 2004 499 495
7.327% amortizing notes due 2014(2) 430 430
7.45% notes due 2004 349 349
7.61% amortizing bank loans due 2003 111 143
7.677% notes due 2016(2) 90 90
LIBOR-based bank loan due 2002 59 84
LIBOR-based bank loan due 2001 25 50
7.627% notes due 2015(2) 80 80
6.92% bank loans due 2005 51 51
6.98% bank loans due 2004(2) 25 25
6.22% notes due 2001(2) 10 10
Other foreign currency obligations (5.9%)(3) 69 75
Other long-term debt (7.0%)(3) 76 74
--------------------------
Total including debt due within one year 2,414 2,576
Debt due within one year (267) (127)
Reclassified from short-term debt 2,725 2,725
--------------------------
Total long-term debt $4,872 $5,174
====================================================================
(1) Debt assumed from ESOP in 1999.
(2) Guarantee of ESOP debt.
(3) Less than $50 individually; weighted-average interest rates at December 31,
2000.
At December 31, 2000 and 1999, the company classified $2,725 of short-term
debt as long-term. Settlement of these obligations is not expected to require
the use of working capital in 2001, as the company has both the intent and
ability to refinance this debt on a long-term basis.
Consolidated long-term debt maturing in each of the five years after
December 31, 2000, is as follows: 2001-$267, 2002-$231, 2003-$182, 2004-$1,153
and 2005-$29.
In early February 2001, the company announced a public offering to
repurchase all of its 7.45 percent guaranteed notes maturing in 2004. At the
expiration of the offering in mid-February, about $230 had been acquired.
FS-28
Note 18. OTHER COMPREHENSIVE INCOME
The components of changes in other comprehensive income and the related tax
effects are shown below.
Year ended December 31
------------------------
2000 1999 1998
--------------------------------------------------------------------
Currency translation adjustment
Before-tax change ....................... $ (7) $(43) $ (1)
Tax benefit ............................. - - -
------------------------
Change, net of tax ...................... (7) (43) (1)
Unrealized holding (loss) gain on securities
Before-tax change ....................... (72) 60 3
Tax benefit (expense) ................... 29 (31) -
------------------------
Change, net of tax ...................... (43) 29 3
Minimum pension liability adjustment
Before-tax change ....................... (23) (16) (24)
Tax benefit ............................. 8 5 9
------------------------
Change, net of tax ...................... (15) (11) (15)
--------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE INCOME
Before-tax change ....................... $(102) $ 1 $(22)
Tax benefit (expense) ................... 37 (26) 9
------------------------
Change, net of tax ...................... $ (65) $ (25) $(13)
====================================================================
NOTE 19. EMPLOYEE BENEFIT PLANS
Pension Plans
The company has defined benefit pension plans for most employees and provides
for certain health care and life insurance plans for active and qualifying
retired employees. The company's policy is to fund the minimum necessary to
satisfy requirements of the Employee Retirement Income Security Act for the
company's pension plans.
The company's annual contributions for medical and dental benefits are
limited to the lesser of actual medical claims or a defined fixed per-capita
amount. Life insurance benefits are paid by the company, and annual
contributions are based on actual plan experience. Nonfunded pension and
postretirement benefits are paid directly when incurred; accordingly, these
payments are not reflected as changes in Plan assets in the following table.
The status of the company's pension plans and other postretirement benefit
plans for 2000 and 1999 is as follows:
Pension Benefits Other Benefits
----------------------------------------
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------
Change in benefit obligation
Benefit obligation at January 1 $3,977 $4,278 $ 1,392 $ 1,468
Service cost ..................................... 93 99 14 21
Interest cost .................................... 280 274 105 96
Plan participants' contributions ................. 1 1 - -
Plan amendments .................................. 5 60 - -
Actuarial loss (gain) ............................ 73 (106) 27 (112)
Foreign currency exchange
rate changes .................................... (47) (33) - -
Benefits paid .................................... (545) (801) (105) (81)
Special termination
benefits(1) ..................................... - 205 - -
Plan divestiture ................................. (1) - - -
-----------------------------------------
Benefit obligation
at December 31 ................................... 3,836 3,977 1,433 1,392
-----------------------------------------
Change in plan assets
Fair value of plan assets
at January 1 ..................................... 4,673 4,741 - -
Actual return on plan assets ..................... 110 720 - -
Foreign currency exchange
rate changes .................................... (46) (25) - -
Employer contribution ............................ 2 10 - -
Plan participants' contribution .................. 1 1 - -
Benefits paid .................................... (513) (774) - -
Plan divestiture ................................. (2) - - -
-----------------------------------------
Fair value of plan assets
at December 31 ................................... 4,225 4,673 - -
-----------------------------------------
Funded status ..................................... 389 696 (1,433) (1,392)
Unrecognized net actuarial gain .................. (37) (480) (130) (160)
Unrecognized prior-service cost .................. 113 124 - -
Unrecognized net transitional
assets .......................................... (12) (44) - -
-----------------------------------------
Total recognized at December 31 $ 453 $ 296 $(1,563) $(1,552)
=========================================
Amounts recognized in the
consolidated balance sheet
at December 31
Prepaid benefit cost ............................ $ 671 $ 495 $ - $ -
Accrued benefit liability ....................... (334) (298) (1,563) (1,552)
Intangible asset ................................ 4 10 - -
Accumulated other
comprehensive income(2) ......................... 112 89 - -
-----------------------------------------
Net amount recognized ............................. $ 453 $ 296 $(1,563) $(1,552)
==========================================
Weighted-average assumptions
as of December 31
Discount rate 7.4% 7.6% 7.5% 7.8%
Expected return on plan assets 9.8% 9.7% - -
Rate of compensation increase 4.2% 4.5% 4.5% 4.5%
===============================================================================================
(1)Relates to a special involuntary termination enhancement to pension benefits
under a companywide restructuring program.
(2)Accumulated other comprehensive income includes deferred income tax of $39
and $31 in 2000 and 1999, respectively.
FS-29
For measurement purposes, separate health care cost-trend rates were used
for pre-age 65 and post-age 65 retirees. The 2001 annual rates of change were
assumed to be 7.2 percent and 16.2 percent, respectively, before gradually
converging to the average ultimate rate of 5.0 percent in 2021 for both pre-age
65 and post-age 65. A one-percentage-point change in the assumed health care
rates would have had the following effects:
One-Percentage- One-Percentage-
Point Increase Point Decrease
-------------------------------------------------------------------------
Effect on total service and interest
cost components $ 13 $ (19)
Effect on postretirement benefit
obligation $133 $(111)
========================================================================
The components of net periodic benefit cost for 2000, 1999 and 1998 were:
Pension Benefits Other Benefits
----------------------------------------------
2000 1999 1998 2000 1999 1998
- ------------------------------------------------------------------------------
Service cost ................. $ 93 $ 99 $113 $ 14 $ 21 $ 19
Interest cost ................ 280 274 275 105 96 93
Expected return on
plan assets ................. (418) (394) (397) - - -
Amortization of
transitional assets ......... (31) (35) (38) - - -
Amortization of prior-
service costs ............... 16 16 14 - - -
Recognized actuarial
losses (gains) .............. 9 1 4 (3) 2 (5)
Settlement gains ............. (54) (104) (11) - - -
Curtailment (gains) losses ... (20) 7 - (15) - -
Special termination
benefit recognition* ........ - 205 - - - -
----------------------------------------------
Net periodic benefit cost $(125) $ 69 $(40) $101 $119 $107
==============================================================================
*Relates to a special involuntary termination enhancement to pension benefits
under a companywide restructuring program.
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for pension plans with accumulated benefit obligations in
excess of plan assets were $416, $334 and $33, respectively, at December 31,
2000, and $428, $368 and $80, respectively, at December 31, 1999.
Profit Sharing/Savings Plan
Eligible employees of the company and certain of its subsidiaries who have
completed one year of service may participate in the Profit Sharing/Savings
Plan. Charges to expense for the profit sharing part of the Profit
Sharing/Savings Plan were $62, $61 and $60 in 2000, 1999 and 1998, respectively.
The company's Savings Plus Plan contributions were funded with leveraged ESOP
shares.
Employee Stock Ownership Plan (ESOP)
In December 1989, the company established a leveraged ESOP as part of the Profit
Sharing/Savings Plan. The ESOP Trust Fund borrowed $1,000 and purchased 28.2
million previously unissued shares of the company's common stock. In June 1999,
the ESOP borrowed $25 at 6.98 percent interest, using the proceeds to pay
interest due on the existing ESOP debt. In July 1999, the company's leveraged
ESOP issued notes of $620 at an average interest rate of 7.42 percent,
guaranteed by Chevron Corporation. The debt proceeds were paid to Chevron
Corporation in exchange for Chevron's assumption of the existing 8.11 percent
ESOP long-term debt of $620. The ESOP provides a partial prefunding of the
company's future commitments to the Profit Sharing/Savings Plan, which will
result in annual income tax savings for the company.
As permitted by AICPA Statement of Position 93-6, "Employers' Accounting
for Employee Stock Ownership Plans," the company has elected to continue its
practices, which are based on Statement of Position 76-3, "Accounting Practices
for Certain Employee Stock Ownership Plans" and subsequent consensus of the
Emerging Issues Task Force of the Financial Accounting Standards Board.
Accordingly, the debt of the ESOP is recorded as debt, and shares pledged as
collateral are reported as deferred compensation in the consolidated balance
sheet and statement of stockholders' equity. The company reports compensation
expense equal to the ESOP debt principal repayments less dividends received by
the ESOP. Interest incurred on the ESOP debt is recorded as interest expense.
Dividends paid on ESOP shares are reflected as a reduction of retained earnings.
All ESOP shares are considered outstanding for earnings-per-share computations.
The company recorded expense for the ESOP of $25, $59 and $58 in 2000, 1999
and 1998, respectively, including $47, $49 and $56 of interest expense related
to the ESOP debt. All dividends paid on the shares held by the ESOP are used to
service the ESOP debt. The dividends used were $54, $33 and $57 in 2000, 1999
and 1998, respectively.
The company made contributions to the ESOP of $64 and $60 in 1999 and 1998,
respectively, to satisfy ESOP debt service in excess of dividends received by
the ESOP. No contributions were required in 2000. The ESOP shares were pledged
as collateral for its debt. Shares are released from a suspense account and
allocated to the accounts of Plan participants, based on the debt service deemed
to be paid in the
FS-30
year in proportion to the total of current year and remaining debt service. The
(credit) charge to compensation expense was $(22), $10 and $2 in 2000, 1999 and
1998, respectively. The ESOP shares as of December 31, 2000 and 1999, were as
follows:
Thousands 2000 1999
- ------------------------------------------------------------
Allocated shares 11,969 10,785
Unallocated shares 10,823 12,963
- ------------------------------------------------------------
Total ESOP shares 22,792 23,748
============================================================
Management Incentive Plans
The company has two incentive plans, the Management Incentive Plan (MIP) and the
Long-Term Incentive Plan (LTIP) for officers and other regular salaried
employees of the company and its subsidiaries who hold positions of significant
responsibility. The MIP is an annual cash incentive plan that links awards to
performance results of the prior year. The cash awards may be deferred by
conversion to stock units or other investment fund alternatives. Awards under
the LTIP may take the form of, but are not limited to, stock options, restricted
stock, stock units and nonstock grants. Charges to expense for the combined
management incentive plans, excluding expense related to LTIP stock options,
which is discussed in Note 20, were $49, $41 and $28 in 2000, 1999 and 1998,
respectively.
Chevron Success Sharing
The company has a program that provides eligible employees with an annual cash
bonus if the company achieves certain financial and safety goals. Until 2000,
the total maximum payout under the program was 8 percent of the employee's
annual salary. Charges for the program were $146, $47 and $51 in 2000, 1999 and
1998, respectively. In 2000, the maximum payout under the program increased to
10 percent.
NOTE 20. STOCK OPTIONS
The company applies APB Opinion No. 25 and related interpretations in accounting
for stock options awarded under its Broad-Based Employee Stock Option Programs
and its Long-Term Incentive Plan, which are described below.
Had compensation cost for the company's stock options been determined based
on the fair market value at the grant dates of the awards consistent with the
methodology prescribed by FAS No. 123, the company's net income and earnings per
share for 2000, 1999 and 1998 would have been the pro forma amounts shown below.
2000 1999 1998
- -----------------------------------------------------------------------------
Net Income As reported ............. $ 5,185 $ 2,070 $ 1,339
Pro forma ............... $ 5,162 $ 2,027 $ 1,294
Earnings per share As reported ............. $ 7.98 $ 3.16 $ 2.05
- diluted $ 7.97 $ 3.14 $ 2.04
Pro forma - basic ............ $ 7.95 $ 3.09 $ 1.98
- diluted .......... $ 7.93 $ 3.08 $ 1.97
=============================================================================
The effects of applying FAS No. 123 in this pro forma disclosure are not
indicative of future amounts. FAS No. 123 does not apply to awards granted prior
to 1995. In addition, certain options vest over several years, and awards in
future years, whose terms and conditions may vary, are anticipated.
Broad-Based Employee Stock Options
In 1996, the company granted to all eligible employees an option for 150 shares
of stock or equivalents at an exercise price of $51.875 per share. In addition,
a portion of the awards granted under the LTIP had terms similar to the
broad-based employee stock options. The options vested in June 1997 when
Chevron's share price closed above $75.00 for three consecutive days.
Options for 7,204,800 shares, including similar-termed LTIP awards, were
granted for this program in 1996. Outstanding option shares were 2,213,450 at
December 31, 1997. In 1998, exercises of 1,361,000 and forfeitures of 10,800 had
reduced the outstanding option shares to 841,650 at year-end 1998. In 1999,
exercises of 740,725, forfeitures of 61,850 and expirations of 39,075 reduced
the outstanding option shares to zero at March 31, 1999, the date of expiration.
Under APB Opinion No. 25, the company recorded gains of $2 for these options in
1999. No gains or expenses for this program were recorded in 2000 and 1998.
The fair market value of each option share on the date
of grant under FAS No. 123 was estimated at $5.66 using a binomial
option-pricing model with the following assumptions: risk-free interest rate of
5.1 percent, dividend yield of 4.2 percent, expected life of three years and a
volatility of 20.9 percent.
In 1998, the company announced another broad-based Employee Stock Option
Program that granted to all eligible employees an option that varied from 100 to
300 shares of stock or equivalents, dependent on the employee's salary or job
grade. These options vested after two years in February 2000. Options for
4,820,800 shares were awarded at an exercise price of $76.3125 per share.
Forfeitures of options for 854,550 shares reduced the outstanding option shares
to 3,966,250 at December 31, 1999. In 2000, exercises of 611,201 and forfeitures
of 290,682 had reduced the outstanding option balance to 3,064,367 at the end of
the year. The options expire February 11, 2008. Under APB Opinion No. 25, the
company recorded expenses of $(2), $4 and $2 for these options in 2000, 1999 and
1998, respectively.
The fair value of each option share on the date of grant under FAS No. 123
was estimated at $19.08 using the average results of Black-Scholes models for
the preceding 10 years. The 10-year averages of each assumption used by the
Black-Scholes models were: risk-free interest rate of 7.0 percent, dividend
yield of 4.2 percent, expected life of seven years and a volatility of 24.7
percent.
FS-31
NOTE 20. STOCK OPTIONS - Continued
Long-Term Incentive Plan
Stock options granted under the LTIP are generally awarded at market price on
the date of grant and are exercisable not earlier than one year and not later
than 10 years from the date of grant. However, a portion of the LTIP options
granted in 1996 had terms similar to the broad-based employee stock options. The
maximum number of shares of common stock that may be granted each year is 1
percent of the total outstanding shares of common stock as of January 1 of such
year.
The weighted-average fair market value of options granted in 2000, 1999 and
1998 was $22.34, $20.40 and $21.10 per share, respectively. The fair market
value of each option on the date of grant was estimated using the Black-Scholes
option-pricing model with the following assumptions for 2000, 1999 and 1998,
respectively: risk-free interest rate of 5.8, 5.5 and 4.5 percent; dividend
yield of 3.0, 3.0 and 3.1 percent; volatility of 25.6, 20.1 and 28.6 percent and
expected life of seven years in all years.
As of December 31, 2000, 10,311,802 shares were under option at exercise
prices ranging from $31.9375 to $99.75 per share. The following table summarizes
information about stock options outstanding under the LTIP, excluding awards
granted with terms similar to the broad-based employee stock options, at
December 31, 2000.
Options Outstanding Options Exercisable
--------------------------------------------------------------
Weighted- Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices (000s) Life(Years) Price (000s) Price
--------------------------------------------------------------------------
$31 to $ 41 314 1.24 $34.53 314 $34.53
41 to 51 2,574 3.81 45.38 2,574 45.38
51 to 61 14 5.32 56.81 14 56.81
61 to 71 752 5.83 66.25 752 66.25
71 to 81 3,250 7.35 79.91 3,244 79.91
81 to 91 3,385 9.31 85.61 1,669 89.79
91 to 101 23 8.55 92.14 23 92.14
- -----------------------------------------------------------------------------
$31 to $101 10,312 6.81 $70.78 8,590 $68.63
=============================================================================
A summary of the status of stock options awarded under the company's LTIP,
excluding awards granted with terms similar to the broad-based employee stock
options, for 2000, 1999 and 1998 follows.
Weighted-
Average
Options Exercise
(000s) Price
-------------------------------------------------------------
Outstanding at December 31, 1997 8,253 $52.83
-------------------------------------------------------------
Granted 1,872 79.13
Exercised (796) 40.47
Forfeited (106) 80.72
-------------------------------------------------------------
Outstanding at December 31, 1998 9,223 $58.91
- --------------------------------------------------------------
Granted 1,836 89.88
Exercised (1,298) 44.29
Forfeited (152) 83.12
- --------------------------------------------------------------
Outstanding at December 31, 1999 9,609 $66.42
- --------------------------------------------------------------
Granted 1,752 81.54
Exercised (924) 43.56
Forfeited (125) 87.70
- --------------------------------------------------------------
Outstanding at December 31, 2000 10,312 $70.78
- --------------------------------------------------------------
Exercisable at December 31
1998 7,367 $53.82
1999 7,839 $61.13
2000 8,590 $68.63
==============================================================
NOTE 21. OTHER CONTINGENCIES AND COMMITMENTS
The U.S. federal income tax liabilities 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.
At December 31, 2000, the company and its subsidiaries, as direct or
indirect guarantors, had contingent liabilities of $25 for notes of affiliated
companies and $179 for notes of others.
The company and its subsidiaries have certain contingent liabilities
relating to long-term unconditional purchase obligations and commitments,
throughput agreements and take-or-pay agreements, some of which relate to
suppliers' financing arrangements. The aggregate amounts of required payments
under these various commitments are: 2001 - $375; 2002-$354; 2003-$333;
2004-$310; 2005-$252; 2006 and after-$946. Total payments under the agreements
were $281 in 2000, $258 in 1999 and $201 in 1998.
FS-32
Note 21. OTHER CONTINGENCIES AND COMMITMENTS - Continued
The company is subject to loss contingencies pursuant to environmental laws
and regulations that in the future may require the company to take action to
correct or ameliorate the effects on the environment of prior disposal or
release of chemical or petroleum substances, 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 such factors as the unknown
magnitude of possible contamination, the unknown timing and extent of the
corrective actions that may be required, the determination of the company's
liability in proportion to other responsible parties, and the extent to which
such costs are recoverable from third parties. While the company 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.
Also, the company does not believe its obligations to make such expenditures
have had, or will have, any significant impact on the company's competitive
position relative to other domestic or international petroleum or chemical
concerns.
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. However, the results of operations and financial
position of certain equity affiliates 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, including the United States, in which it
operates. In certain locations, host governments have imposed restrictions,
controls and taxes, and in others, political conditions have existed that may
threaten the safety of employees and the company's continued presence in those
countries. Internal unrest or strained relations between a host government and
the company or other governments may affect the company's operations. Those
developments have, at times, significantly affected the company's operations and
related results and are carefully considered by management when evaluating the
level of current and future activity in such countries.
Also for oil and gas producing operations, ownership agreements may provide
for periodic reassessments of equity interests in estimated oil and gas
reserves. These activities, individually or together, may result in gains or
losses that could be material to earnings in any given period.
Areas in which the company has significant operations include the United
States, Canada, Australia, the United Kingdom, Norway, Congo, Angola, Nigeria,
Chad, Equatorial Guinea, 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 22. EARNINGS PER SHARE (EPS)
Basic EPS includes the effects of deferrals of salary and other compensation
awards that are invested in Chevron stock units by certain officers and
employees of the company. Diluted EPS includes the effects of these deferrals as
well as the dilutive effects of outstanding stock options awarded under the LTIP
and Broad-Based Employee Stock Option Program (see Note 20, "Stock Options").
The following table sets forth the computation of basic and diluted EPS.
2000 1999 1998
------------------------------------------------------------------------------------
Net Shares Per-Share Net Shares Per-Share Net Shares Per-Share
Income (millions) Amount Income (millions) Amount Income (millions) Amount
--------------------------------------------------------------------------------------------------------------------------------
Net income $5,185 $2,070 $1,339
Weighted-average common shares outstanding 649.0 655.5 653.7
Dividend equivalents paid on Chevron
stock units 2 3 3
Deferred awards held as Chevron stock units 0.9 1.0 1.2
--------------------------------------------------------------------------------------------------------------------------------
Basic EPS COMPUTATION $5,187 649.9 $7.98 $2,073 656.5 $3.16 $1,342 654.9 $2.05
Dilutive effects of stock options 1.2 3.0 2.2
--------------------------------------------------------------------------------------------------------------------------------
Diluted EPS COMPUTATION $5,187 651.1 $7.97 $2,073 659.5 $3.14 $1,342 657.1 $2.04
================================================================================================================================
FS-33
SUPPLEMENTAL INFORMATION ON OIL AND GAS PRODUCING ACTIVITIES
Unaudited
In accordance with Statement of Financial Accounting Standards No. 69,
"Disclosures About Oil and Gas Producing Activities" (FAS No. 69), this section
provides supplemental information on oil and gas exploration and producing
activities of the company in six separate tables. Tables I through III provide
historical cost information pertaining to costs incurred in exploration,
property acquisitions and development; capitalized costs; and results of
operations. Tables IV through VI present information on the company's estimated
net proved reserve quantities, standardized measure of estimated discounted
future net cash flows related to proved reserves, and changes in estimated
discounted future net cash flows. The Africa geographic area includes activities
principally in Nigeria, Angola, Chad, Congo and Democratic Republic of Congo.
The "Other" geographic category includes activities in Australia, Argentina, the
United Kingdom North Sea, Canada, Papua New Guinea, Venezuela, Brazil, China,
Thailand and other countries. Amounts shown for affiliated companies are
Chevron's 50 percent equity share in P.T. Caltex Pacific Indonesia (CPI), an
exploration and production company operating in Indonesia, and its 45 percent
equity share of Tengizchevroil (TCO), an exploration and production partnership
operating in the Republic of Kazakhstan.
TABLE 1 - COSTS INCURRED IN EXPLORATION, PROPERTY ACQUISITIONS
AND DEVELOPMENT (1)
Consolidated Companies Affiliated Companies
--------------------------------- --------------------
Millions of dollars U.S. Africa Other Total CPI TCO Worldwide
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2000
Exploration
Wells $ 366 $ 40 $ 129 $ 535 $ 5 $ - $ 540
Geological and geophysical 30 25 94 149 14 - 163
Rentals and other 36 11 65 112 - - 112
- ---------------------------------------------------------------------------------------------------------------------------
Total exploration 432 76 288 796 19 - 815
- ---------------------------------------------------------------------------------------------------------------------------
Property acquisitions(2)
Proved(4) 24 1 - 25 - - 25
Unproved 61 9 175 245 - - 245
- ---------------------------------------------------------------------------------------------------------------------------
Total property acquisitions 85 10 175 270 - - 270
- ---------------------------------------------------------------------------------------------------------------------------
Development 737 395 356 1,488 168 240 1,896
- --------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS INCURRED $1,254 $ 481 $ 819 $2,554 $187 $240 $2,981
==========================================================================================================================
YEAR ENDED DECEMBER 31, 1999
Exploration
Wells $ 258 $ 40 $ 120 $ 418 $ 3 $ - $ 421
Geological and geophysical 37 25 85 147 17 - 164
Rentals and other 30 7 60 97 - - 97
- ---------------------------------------------------------------------------------------------------------------------------
Total exploration 325 72 265 662 20 - 682
- ---------------------------------------------------------------------------------------------------------------------------
Property acquisitions(2),(3)
Proved(4) 9 - 1,070 1,079 - - 1,079
Unproved 27 11 1,202 1,240 - - 1,240
- ---------------------------------------------------------------------------------------------------------------------------
Total property acquisitions 36 11 2,272 2,319 - - 2,319
- ---------------------------------------------------------------------------------------------------------------------------
Development 532 518 375 1,425 182 148 1,755
- --------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS INCURRED $ 893 $ 601 $2,912 $4,406 $202 $148 $4,756
==========================================================================================================================
YEAR ENDED DECEMBER 31, 1998
Exploration
Wells $ 350 $ 108 $ 101 $ 559 $ 3 $ - $ 562
Geological and geophysical 49 31 112 192 16 - 208
Rentals and other 44 23 53 120 - - 120
- ---------------------------------------------------------------------------------------------------------------------------
Total exploration 443 162 266 871 19 - 890
- ---------------------------------------------------------------------------------------------------------------------------
Property acquisitions(2)
Proved(4) 12 - - 12 - - 12
Unproved 58 - 14 72 - - 72
- ---------------------------------------------------------------------------------------------------------------------------
Total property acquisitions 70 - 14 84 - - 84
- ---------------------------------------------------------------------------------------------------------------------------
Development 680 561 411 1,652 156 120 1,928
- ---------------------------------------------------------------------------------------------------------------------------
Total Costs Incurred $1,193 $ 723 $ 691 $2,607 $175 $120 $2,902
===========================================================================================================================
(1) Includes costs incurred whether capitalized or expensed. Excludes support
equipment expenditures.
(2) Proved amounts include wells, equipment and facilities associated with
proved reserves.
(3)Includes acquisition costs and related deferred income taxes for purchases of
Rutherford-Moran Oil Corporation and Petrolera Argentina San Jorge S.A.
(4)Does not include properties acquired through property exchanges.
FS-34
TABLE II - CAPITALIZED COSTS RELATED TO OIL AND GAS PRODUCING ACTIVITIES
Consolidated Companies Affiliated Companies
--------------------------------------- --------------------
Millions of dollars U.S. Africa Other Total CPI TCO Worldwide
- --------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 2000
Unproved properties $ 337 $ 78 $ 1,459 $ 1,874 $ - $ 378 $ 2,252
Proved properties and related producing
assets 16,713 4,621 8,346 29,680 1,370 1,158 32,208
Support equipment 469 308 280 1,057 906 254 2,217
Deferred exploratory wells 101 204 95 400 - - 400
Other uncompleted projects 348 640 476 1,464 265 136 1,865
- --------------------------------------------------------------------------------------------------------------------------
GROSS CAPITALIZED COSTS 17,968 5,851 10,656 34,475 2,541 1,926 38,942
- --------------------------------------------------------------------------------------------------------------------------
Unproved properties valuation 128 59 219 406 - - 406
Proved producing properties -
Depreciation and depletion 11,991 2,363 3,774 18,128 751 131 19,010
Future abandonment and restoration 778 400 227 1,405 63 13 1,481
Support equipment depreciation 315 127 172 614 535 97 1,246
- --------------------------------------------------------------------------------------------------------------------------
Accumulated provisions 13,212 2,949 4,392 20,553 1,349 241 22,143
- --------------------------------------------------------------------------------------------------------------------------
NET CAPITALIZED COSTS $ 4,756 $2,902 $ 6,264 $13,922 $ 1,192 $1,685 $ 16,799
- --------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1999
Unproved properties $ 317 $ 69 $ 1,441 $ 1,827 $ - $ 378 $ 2,205
Proved properties and related producing
assets 16,662 4,034 7,318 28,014 1,158 689 29,861
Support equipment 478 268 321 1,067 902 243 2,212
Deferred exploratory wells 136 172 66 374 - - 374
Other uncompleted projects 354 758 664 1,776 335 405 2,516
- --------------------------------------------------------------------------------------------------------------------------
GROSS CAPITALIZED COSTS 17,947 5,301 9,810 33,058 2,395 1,715 37,168
- --------------------------------------------------------------------------------------------------------------------------
Unproved properties valuation 133 53 157 343 - - 343
Proved producing properties -
Depreciation and depletion 11,953 1,993 3,071 17,017 681 99 17,797
Future abandonment and restoration 835 371 208 1,414 60 10 1,484
Support equipment depreciation 317 104 142 563 476 80 1,119
- --------------------------------------------------------------------------------------------------------------------------
Accumulated provisions 13,238 2,521 3,578 19,337 1,217 189 20,743
- --------------------------------------------------------------------------------------------------------------------------
NET CAPITALIZED COSTS $ 4,709 $2,780 $ 6,232 $13,721 $ 1,178 $1,526 $ 16,425
==========================================================================================================================
AT DECEMBER 31, 1998
Unproved properties $ 390 $ 58 $ 235 $ 683 $ - $ 378 $ 1,061
Proved properties and related producing
assets 16,759 3,672 6,253 26,684 1,015 629 28,328
Support equipment 472 182 307 961 768 232 1,961
Deferred exploratory wells 51 51 91 193 - - 193
Other uncompleted projects 700 893 383 1,976 408 245 2,629
- --------------------------------------------------------------------------------------------------------------------------
GROSS CAPITALIZED COSTS 18,372 4,856 7,269 30,497 2,191 1,484 34,172
- --------------------------------------------------------------------------------------------------------------------------
Unproved properties valuation 151 49 110 310 - - 310
Proved producing properties -
Depreciation and depletion 11,808 1,719 2,705 16,232 689 72 16,993
Future abandonment and restoration 861 337 187 1,385 57 8 1,450
Support equipment depreciation 315 90 127 532 373 67 972
- --------------------------------------------------------------------------------------------------------------------------
Accumulated provisions 13,135 2,195 3,129 18,459 1,119 147 19,725
- --------------------------------------------------------------------------------------------------------------------------
NET CAPITALIZED COSTS $ 5,237 $2,661 $ 4,140 $12,038 $ 1,072 $1,337 $ 14,447
==========================================================================================================================
TABLE III - RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES(1)
The company's results of operations from oil and gas producing activities for
the years 2000, 1999 and 1998 are shown in the following table.
Net income from exploration and production activities as reported on page
FS-7 reflects income taxes computed on an effective rate basis. In accordance
with FAS No. 69, income taxes in Table III are based on statutory tax rates,
reflecting allowable deductions and tax credits. Interest income and expense are
excluded from the results reported in Table III and from the net income amounts
on page FS-7.
FS-35
TABLE III - RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES(1)
- Continued
Consolidated Companies Affiliated Companies
------------------------------------------- --------------------
Millions of dollars U.S. Africa Other Total CPI TCO Worldwide
- ---------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2000
Revenues from net production
Sales $ 2,498 $ 2,804 $2,351 $ 7,653 $ 50 $ 710 $ 8,413
Transfers 2,762 506 952 4,220 831 - 5,051
- ---------------------------------------------------------------------------------------------------------------------------
Total 5,260 3,310 3,303 11,873 881 710 13,464
Production expenses (1,112) (378) (520) (2,010) (223) (114) (2,347)
Proved producing properties: depreciation,
depletion and abandonment provision (862) (316) (619) (1,797) (129) (53) (1,979)
Exploration expenses (265) (62) (237) (564) (14) - (578)
Unproved properties valuation (22) (6) (82) (110) - - (110)
Other income (expense)(2) (26) 61 243 278 (2) (56) 220
- ---------------------------------------------------------------------------------------------------------------------------
Results before income taxes 2,973 2,609 2,088 7,670 513 487 8,670
Income tax expense (1,100) (1,942) (924) (3,966) (258) (146) (4,370)
- ---------------------------------------------------------------------------------------------------------------------------
RESULTS OF PRODUCING OPERATIONS $ 1,873 $ 667 $1,164 $ 3,704 $ 255 $ 341 $ 4,300
===========================================================================================================================
YEAR ENDED DECEMBER 31, 1999
Revenues from net production
Sales $ 1,449 $ 1,756 $1,415 $ 4,620 $ 24 $ 356 $ 5,000
Transfers 1,626 299 597 2,522 592 - 3,114
- ---------------------------------------------------------------------------------------------------------------------------
Total 3,075 2,055 2,012 7,142 616 356 8,114
Production expenses (1,005) (340) (411) (1,756) (206) (88) (2,050)
Proved producing properties: depreciation,
depletion and abandonment provision (764) (311) (433) (1,508) (109) (47) (1,664)
Exploration expenses (167) (97) (274) (538) (17) - (555)
Unproved properties valuation (22) (5) (36) (63) - - (63)
Other income (expense)(2),(3) (358) (53) 5 (406) (2) (9) (417)
- ---------------------------------------------------------------------------------------------------------------------------
Results before income taxes 759 1,249 863 2,871 282 212 3,365
Income tax expense (257) (848) (416) (1,521) (143) (63) (1,727)
- ---------------------------------------------------------------------------------------------------------------------------
RESULTS OF PRODUCING OPERATIONS $ 502 $ 401 $ 447 $ 1,350 $ 139 $ 149 $ 1,638
===========================================================================================================================
YEAR ENDED DECEMBER 31, 1998
Revenues from net production
Sales $ 1,386 $ 1,118 $ 757 $ 3,261 $ 28 $ 176 $ 3,465
Transfers 1,185 212 458 1,855 454 - 2,309
- ---------------------------------------------------------------------------------------------------------------------------
Total 2,571 1,330 1,215 5,116 482 176 5,774
Production expenses (1,172) (346) (304) (1,822) (153) (76) (2,051)
Proved producing properties: depreciation,
depletion and abandonment provision (714) (301) (316) (1,331) (106) (40) (1,477)
Exploration expenses (213) (53) (212) (478) (16) - (494)
Unproved properties valuation (20) (8) (16) (44) - - (44)
Other income (expense)(2),(3) 54 48 85 187 2 (7) 182
- ---------------------------------------------------------------------------------------------------------------------------
Results before income taxes 506 670 452 1,628 209 53 1,890
Income tax expense (163) (328) (323) (814) (102) (16) (932)
- ---------------------------------------------------------------------------------------------------------------------------
RESULTS OF PRODUCING OPERATIONS $ 343 $ 342 $ 129 $ 814 $ 107 $ 37 $ 958
===========================================================================================================================
(1)The value of owned production consumed as fuel has been eliminated from
revenues and production expenses, and the related volumes have been deducted
from net production in calculating the unit average sales price and production
cost; this has no effect on the results of producing operations.
(2)Includes gas processing fees, net sulfur income, currency transaction gains
and losses, certain significant impairment write-downs, miscellaneous expenses,
etc. Also includes net income from related oil and gas activities that do not
have oil and gas reserves attributed to them (e.g., net income from technical
and operating service agreements) and items identified in the Management's
Discussion and Analysis on page FS-7.
(3)Conformed to 2000 presentation; removed equity earnings for Dynegy Inc.
FS-36
TABLE III - RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES (1)(2)
- Continued
Consolidated Companies Affiliated Companies
-------------------------------- --------------------
Per-unit average sales price and production cost(1),(2) U.S. Africa Other Total CPI TCO Worldwide
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2000
Average sales prices
Liquids, per barrel $26.35 $26.75 $26.67 $26.59 $22.41 $20.14 $25.63
Natural gas, per thousand cubic feet 4.04 0.03 2.98 3.65 - 0.13 3.55
Average production costs, per barrel 5.37 2.99 3.80 4.27 5.67 2.91 4.28
===============================================================================================================================
YEAR ENDED DECEMBER 31, 1999
Average sales prices
Liquids, per barrel $15.73 $17.27 $17.69 $16.82 $13.40 $10.53 $15.90
Natural gas, per thousand cubic feet 2.17 0.05 2.21 2.14 - 0.38 2.10
Average production costs, per barrel 4.73 2.81 3.32 3.84 4.47 2.39 3.79
===============================================================================================================================
YEAR ENDED DECEMBER 31, 1998
Average sales prices
Liquids, per barrel $11.27 $11.49 $11.21 $11.34 $ 9.73 $ 5.53 $10.68
Natural gas, per thousand cubic feet 2.02 0.07 2.26 2.04 - 0.57 2.01
Average production costs, per barrel 5.30 2.94 2.93 4.12 3.10 2.32 3.91
===============================================================================================================================
Average sales price for liquids ($/Bbl)
December 2000 $25.41 $23.23 $24.87 $24.43 $22.33 $24.39 $24.21
December 1999 22.25 24.88 24.06 23.68 23.68 11.55 22.65
December 1998 8.86 9.55 9.04 9.17 8.33 3.69 8.58
===============================================================================================================================
Average sales price for natural gas ($/MCF)
December 2000 $ 7.70 $ 0.04 $ 4.16 $ 6.47 $ - $ 0.25 $ 6.19
December 1999 2.20 0.04 2.41 2.23 - 0.38 2.18
December 1998 2.23 - 2.47 2.29 - 0.57 2.26
===============================================================================================================================
(1)The value of owned production consumed as fuel has been eliminated from
revenues and production expenses, and the related volumes have been deducted
from net production in calculating the unit average sales price and production
cost; this has no effect on the results of producing operations.
(2)Natural gas converted to crude oil-equivalent gas (OEG) barrels at a rate of
6 MCF=1 OEG barrel.
TABLE IV - RESERVE QUANTITY INFORMATION
The company's estimated net proved underground oil and gas reserves and changes
thereto for the years 2000, 1999 and 1998 are shown in the following table.
Proved reserves are estimated by company asset teams composed of earth
scientists and reservoir engineers. These proved reserve estimates are reviewed
annually by the corporation's Reserves Advisory Committee to ensure that
rigorous professional standards and the reserves definitions prescribed by the
U.S. Securities and Exchange Commission are consistently applied throughout the
company.
Proved reserves are the estimated quantities that geologic and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions. Due to
the inherent uncertainties and the limited nature of reservoir data, estimates
of underground reserves are subject to change as additional information becomes
available.
Proved reserves do not include additional quantities recoverable beyond the
term of the lease or concession agreement or that may result from extensions of
currently proved areas or from applying secondary or tertiary recovery processes
not yet tested and determined to be economic.
Proved developed reserves are the quantities expected to be recovered
through existing wells with existing equipment and operating methods.
"Net" reserves exclude royalties and interests owned by others and reflect
contractual arrangements and royalty obligations in effect at the time of the
estimate.
Chevron operates under a risked service agreement Venezuela's Block LL-652,
located in the northeast section of Lake Maracaibo. Chevron is accounting for
LL-652 as an oil and gas activity and, at December 31, 2000, had recorded 57
million barrels of proved crude oil reserves.
No reserve quantities have been recorded for the company's other service
agreement in Venezuela, the Boscan Field.
FS-37
TABLE IV - RESERVE QUANTITY INFORMATION - Continued
NET PROVED RESERVES OF CRUDE OIL, CONDENSATE NET PROVED RESERVES OF NATURAL GAS
AND NATURAL GAS LIQUIDS Millions of barrels Billions of cubic feet
------------------------------------------------- ---------------------------------------------------
Consolidated Companies Affiliates Consolidated Companies Affiliates
---------------------------- -------------- World- ---------------------------- -------------- World-
U.S. Africa Other Total CPI TCO wide U.S. Africa Other Total CPI TCO wide
- ---------------------------------------------------------------------------------------------------------------------------------
RESERVES AT
JANUARY 1, 1998 1,196 1,131 519 2,846 578 1,082 4,506 4,991 223 3,187 8,401 161 1,401 9,963
Changes attributable to:
Revisions (1) 106 28 133 110 (3) 7 250 (151) 77 13 (61) 7 (17) (71)
Improved recovery 36 88 36 160 25 - 185 7 - - 7 12 - 19
Extensions
and discoveries 43 92 7 142 2 16 160 372 - 3 375 1 21 397
Purchases(1) 5 - 30 35 - - 35 32 - 5 37 - - 37
Sales(2) (12) - (22) (34) - - (34) (119) - (50) (169) - - (169)
Production (119) (117) (77) (313) (62) (30) (405) (635) (12) (175) (822) (30) (21) (873)
- --------------------------------------------------------------------------- ---------------------------------------------------
RESERVES AT
DECEMBER 31, 1998 1,148 1,300 521 2,969 653 1,075 4,697 4,497 288 2,983 7,768 151 1,384 9,303
Changes attributable to:
Revisions (23) 3 (24) (44) (98)(3) 115 (27) (426) 49 30 (347) 2 126 (219)
Improved recovery 44 62 20 126 30 - 156 7 - 8 15 1 - 16
Extensions
and discoveries 50 45 17 112 2 76 190 347 - 86 433 5 98 536
Purchases(1) 1 - 213 214 - - 214 35 - 372 407 - - 407
Sales(2) (33) - (2) (35) - - (35) (74) - - (74) - - (74)
Production (115) (120) (84) (319) (59) (33) (411) (598) (15) (248) (861) (25) (27) (913)
- --------------------------------------------------------------------------- ---------------------------------------------------
RESERVES AT
DECEMBER 31, 1999 1,072 1,290 661 3,023 528 1,233 4,784 3,788 322 3,231 7,341 134 1,581 9,056
Changes attributable to:
Revisions (5) 56 4 55 35 105 195 (29) 450 140 561 8 126 695
Improved recovery 58 20 9 87 16 - 103 12 - 5 17 - - 17
Extensions
and discoveries 46 92 65 203 2 7 212 405 1 371 777 4 9 790
Purchases(1) 5 131 3 139 - - 139 18 12 - 30 - - 30
Sales(2) (8) - - (8) - - (8) (131) - (1) (132) - - (132)
Production (114) (124) (98) (336) (53) (35) (424) (570) (17) (260) (847) (24) (33) (904)
- --------------------------------------------------------------------------- ---------------------------------------------------
RESERVES AT
DECEMBER 31, 2000 1,054 1,465 644 3,163 528 1,310 5,001 3,493 768 3,486 7,747 122 1,683 9,552
=========================================================================== ===================================================
Developed reserves
- --------------------------------------------------------------------------- ---------------------------------------------------
At January 1, 1998 1,025 721 293 2,039 435 532 3,006 4,391 223 1,695 6,309 145 688 7,142
At December 31, 1998 982 891 342 2,215 436 646 3,297 3,918 263 2,074 6,255 135 832 7,222
At December 31, 1999 905 940 489 2,334 340 790 3,464 3,345 272 2,243 5,860 131 1,011 7,002
At December 31, 2000 881 943 460 2,284 327 795 3,406 3,109 290 2,929 6,328 121 1,019 7,468
=================================================================================================================================
(1)Includes reserves acquired through property exchanges.
(2)Includes reserves disposed of through property exchanges.
(3)Mainly includes crude reserves revisions associated with CPI's cost-recovery
formula.
TABLE V - STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO
PROVED OIL AND GAS RESERVES
The standardized measure of discounted future net cash flows, related to the
above proved oil and gas reserves, is calculated in accordance with the
requirements of FAS No. 69. Estimated future cash inflows from production are
computed by applying year-end prices for oil and gas to year-end quantities of
estimated net proved reserves. Future price changes are limited to those
provided by contractual arrangements in existence at the end of each reporting
year. Future development and production costs are those estimated future
expenditures necessary to develop and produce year-end estimated proved reserves
based on year-end cost indices, assuming continuation of year-end economic
conditions. Estimated future income taxes are calculated by applying appropriate
year-end statutory tax rates. These rates reflect allowable deductions and tax
credits and are applied to estimated future pretax net cash flows, less the tax
basis of related assets. Discounted future net cash flows are calculated using
10 percent midperiod discount factors. Discounting requires a year-by-year
estimate of when future expenditures will be incurred and when reserves will be
produced.
The information provided does not represent management's estimate of the
company's expected future cash flows or value of proved oil and gas reserves.
Estimates of proved reserve quantities are imprecise and change over time as new
information becomes available. Moreover, probable and possible reserves, which
may become proved in the future, are excluded from the calculations. The
arbitrary valuation prescribed under FAS No. 69 requires assumptions as to the
timing and amount of future development and production costs. The calculations
are made as of December 31 each year and should not be relied upon as an
indication of the company's future cash flows or value of its oil and gas
reserves.
FS-38
TABLE V - STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATED TO
PROVED OIL AND GAS RESERVES - Continued
Consolidated Companies Affiliated Companies
---------------------------------------- ---------------------
Millions of dollars U.S. Africa Other Total CPI TCO Worldwide
- -------------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 2000
Future cash inflows from production $ 60,830 $ 33,950 $ 27,490 $122,270 $ 12,700 $ 30,350 $ 165,320
Future production and development costs (13,610) (7,740) (6,410) (27,760) (8,560) (7,250) (43,570)
Future income taxes (16,590) (15,690) (7,720) (40,000) (1,720) (6,440) (48,160)
- -------------------------------------------------------------------------------------------------------------------------
Undiscounted future net cash flows 30,630 10,520 13,360 54,510 2,420 16,660 73,590
10 percent midyear annual discount for
timing of estimated cash flows (12,340) (4,130) (5,210) (21,680) (930) (11,180) (33,790)
- -------------------------------------------------------------------------------------------------------------------------
STANDARDIZED MEASURE OF DISCOUNTED
FUTURE NET CASH FLOWS $ 18,290 $ 6,390 $ 8,150 $ 32,830 $ 1,490 $ 5,480 $ 39,800
=========================================================================================================================
AT DECEMBER 31, 1999
Future cash inflows from production $ 31,650 $ 31,830 $ 23,690 $ 87,170 $ 11,950 $ 24,380 $ 123,500
Future production and development costs (11,350) (6,030) (5,420) (22,800) (7,830) (4,900) (35,530)
Future income taxes (7,050) (16,490) (6,200) (29,740) (1,820) (4,980) (36,540)
- -------------------------------------------------------------------------------------------------------------------------
Undiscounted future net cash flows 13,250 9,310 12,070 34,630 2,300 14,500 51,430
10 percent midyear annual discount for
timing of estimated cash flows (5,480) (2,920) (4,590) (12,990) (900) (10,400) (24,290)
- -------------------------------------------------------------------------------------------------------------------------
Standardized Measure of Discounted
Future Net Cash Flows $ 7,770 $ 6,390 $ 7,480 $ 21,640 $ 1,400 $ 4,100 $ 27,140
=========================================================================================================================
AT DECEMBER 31, 1998
Future cash inflows from production $ 19,810 $ 12,560 $ 13,010 $ 45,380 $ 6,020 $ 8,360 $ 59,760
Future production and development costs (12,940) (6,980) (4,930) (24,850) (4,470) (5,860) (35,180)
Future income taxes (1,970) (2,110) (2,850) (6,930) (660) (200) (7,790)
- -------------------------------------------------------------------------------------------------------------------------
Undiscounted future net cash flows 4,900 3,470 5,230 13,600 890 2,300 16,790
10 percent midyear annual discount for
timing of estimated cash flows (1,880) (1,070) (2,190) (5,140) (390) (1,990) (7,520)
- -------------------------------------------------------------------------------------------------------------------------
Standardized Measure of Discounted
Future Net Cash Flows $ 3,020 $ 2,400 $ 3,040 $ 8,460 $ 500 $ 310 $ 9,270
=========================================================================================================================
TABLE VI - CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH
FLOWS FROM PROVED RESERVES
Consolidated Companies Affiliated Companies Worldwide
------------------------- ------------------------ ---------------------------
Millions of dollars 2000 1999 1998 2000 1999 1998 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
PRESENT VALUE AT JANUARY 1 $21,640 $ 8,460 $13,110 $5,500 $ 810 $ 1,890 $27,140 $ 9,270 $15,000
- --------------------------------------------------------------------------------------------------------------------------
Sales and transfers of oil and gas
produced, net of production costs (9,863) (5,385) (3,294) (1,254) (679) (429) (11,117) (6,064) (3,723)
Development costs incurred 1,488 1,425 1,652 408 330 276 1,896 1,755 1,928
Purchases of reserves 1,154 2,811 208 - - - 1,154 2,811 208
Sales of reserves (1,020) (344) (347) - - - (1,020) (344) (347)
Extensions, discoveries and improved
recovery, less related costs 5,147 2,886 813 132 385 49 5,279 3,271 862
Revisions of previous quantity
estimates (1,093) (503) 262 1,281 84 280 188 (419) 542
Net changes in prices, development
and production costs 17,105 25,457 (11,321) 625 6,938 (2,159) 17,730 32,395 (13,480)
Accretion of discount 3,672 1,165 2,096 817 135 289 4,489 1,300 2,385
Net change in income tax (5,400) (14,332) 5,281 (539) (2,503) 614 (5,939) (16,835) 5,895
- --------------------------------------------------------------------------------------------------------------------------
Net change for the year 11,190 13,180 (4,650) 1,470 4,690 (1,080) 12,660 17,870 (5,730)
- --------------------------------------------------------------------------------------------------------------------------
PRESENT VALUE AT DECEMBER 31 $32,830 $21,640 $ 8,460 $6,970 $5,500 $ 810 $39,800 $27,140 $ 9,270
==========================================================================================================================
The changes in present values between years, which can be significant, reflect
changes in estimated proved reserve quantities and prices and assumptions used
in forecasting production volumes and costs. Changes in the timing of production
are included with "Revisions of previous quantity estimates."
FS-39
FIVE YEAR FINANCIAL SUMMARY
Millions of dollars, except per-share amounts 2000 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF INCOME DATA
REVENUES
Sales and other operating revenues
Refined products $20,484 $13,742 $11,461 $15,586 $15,785
Crude oil 17,075 10,078 7,781 11,296 12,397
Natural gas 3,615 2,256 2,104 2,568 3,299
Natural gas liquids 813 432 322 553 1,167
Other petroleum 1,460 1,115 1,063 1,118 1,184
Chemicals 2,757 3,544 3,054 3,520 3,422
Coal and other minerals 279 360 399 359 340
Excise taxes 4,060 3,910 3,756 5,587 5,202
Corporate and other 49 11 3 9 (14)
- -------------------------------------------------------------------------------------------------- ---------------------------
Total sales and other operating revenues 50,592 35,448 29,943 40,596 42,782
Income from equity affiliates 750 526 228 688 767
Other income 787 612 386 679 344
- -------------------------------------------------------------------------------------------------- ---------------------------
TOTAL REVENUES 52,129 36,586 30,557 41,963 43,893
COSTS, OTHER DEDUCTIONS AND INCOME TAXES 46,944 34,516 29,218 38,707 41,286
- -------------------------------------------------------------------------------------------------- ---------------------------
NET INCOME $ 5,185 $ 2,070 $ 1,339 $ 3,256 $ 2,607
==============================================================================================================================
NET INCOME PER SHARE OF COMMON STOCK - BASIC $7.98 $3.16 $2.05 $4.97 $3.99
- DILUTED $7.97 $3.14 $2.04 $4.95 $3.98
==============================================================================================================================
CASH DIVIDENDS PER SHARE $2.60 $2.48 $2.44 $2.28 $2.08
==============================================================================================================================
CONSOLIDATED BALANCE SHEET DATA (AT DECEMBER 31)
Current assets $ 8,213 $ 8,297 $ 6,297 $ 7,006 $ 7,942
Properties, plant and equipment (net) 22,894 25,317 23,729 22,671 21,496
Total assets 41,264 40,668 36,540 35,473 34,854
Short-term debt 1,079 3,434 3,165 1,637 2,706
Other current liabilities 6,595 5,455 4,001 5,309 6,201
Long-term debt and capital lease obligations 5,153 5,485 4,393 4,431 3,988
Stockholders' equity 19,925 17,749 17,034 17,472 15,623
Per share $ 31.08 $ 27.04 $ 26.08 $ 26.64 $ 23.92
==============================================================================================================================
SELECTED DATA
Return on average stockholders' equity 27.5% 11.9% 7.8% 19.7% 17.4%
Return on average capital employed 20.8% 9.4% 6.7% 15.0% 12.7%
Total debt/total debt plus equity 23.8% 33.4% 30.7% 25.8% 30.0%
Capital and exploratory expenditures(1) $ 5,153 $ 6,133 $ 5,314 $ 5,541 $ 4,840
Common stock price - High $ 94.88 $104.94 $ 90.19 $ 89.19 $ 68.38
- Low $ 69.94 $ 73.13 $ 67.75 $ 61.75 $ 51.00
- Year-end $ 84.44 $ 86.63 $ 82.94 $ 77.00 $ 65.00
Common shares outstanding at year-end (in thousands) 641,060 656,346 653,026 655,931 653,086
Weighted-average shares outstanding
for the year (in thousands) 649,014 655,468 653,667 654,991 652,769
Number of employees at year-end(2) 34,610 36,490 39,191 39,362 40,820
==============================================================================================================================
(1) Includes equity in affiliates' expenditures. $967 $782 $994 $1,174 $983
(2) Includes service station personnel.
FS-40
