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Chevron Reports Fourth quarter Net Income of $3.77 Billion, Down 9 Percent From $4.14 Billion in Fourth Quarter 2005- Upstream earnings of $2.91 billion decline $340 million, due primarily to lower prices for U.S. natural gas
SAN RAMON, Calif., Feb. 2 /PRNewswire-FirstCall/ -- Chevron Corporation (NYSE: CVX) today reported preliminary net income of $3.77 billion ($1.74 per share - diluted) for the fourth quarter 2006, compared with $4.14 billion ($1.86 per share - diluted) in the 2005 fourth quarter. For the full year 2006, net income was $17.14 billion ($7.80 per share - diluted), an increase of 22 percent from $14.10 billion ($6.54 per share - diluted) in 2005. Earnings Summary
Fourth Quarter Year
Millions of Dollars 2006 2005 2006 2005
Income by Business Segment
Upstream - Exploration
and Production $2,909 $3,250 $13,142 $11,724
Downstream - Refining,
Marketing and
Transportation 954 808 3,973 2,766
Chemicals 124 71 539 298
All Other (215) 15 (516) (689)
Net Income* $3,772 $4,144 $17,138 $14,099
* Includes foreign currency
effects $ 56 $ (42) $ (219) $ (61)
"Fourth quarter earnings benefited from an improvement in the operating performance of our oil and gas fields and refineries, especially in the United States," said Chairman and CEO Dave O'Reilly. "However, this benefit to earnings was more than offset by the effect of a sharp decline in U.S. natural gas prices from a year earlier." Operating Developments and Strategic Progress The company also noted other activities of operational and strategic importance in recent months: -- Angola: Announcement of first crude oil production from the Landana
North reservoir in the 31 percent-owned and operated Tombua-Landana
development area. This initial production is connected to the nearby
Benguela Belize-Lobito Tomboco project. Tombua-Landana is the
company's third deepwater development offshore Angola.
The company also announced a discovery of crude oil at the 31 percent-
owned and operated Lucapa-1 well in deepwater Block 14. Appraisal
drilling and additional geologic and engineering studies will follow to
assess the resource potential.
-- Australia: Discovery of natural gas at the 67 percent-owned and
operated Clio-1 exploration well offshore northwestern Australia, near
the Gorgon Field.
-- United States: Expansion of the Fluid Catalytic Cracking Unit completed
at the company's refinery in Pascagoula, Mississippi, increasing
gasoline manufacturing capacity by about 10 percent. The company also
submitted an environmental permit application for construction of
facilities designed to increase gasoline output by another 15 percent.
-- Proved Reserves: Addition of approximately 950 million barrels of oil-
equivalent proved reserves in 2006, including volumes associated with
oil sands mining activities. These additions, which are subject to
final reviews, equated to 101 percent of oil-equivalent production for
the year.
Approximately 30 percent of the added reserves were associated with
mining activities at the Athabasca Oil Sands Project in Canada. The
crude oil extracted through this bitumen- mining operation is not
considered to be an oil and gas producing activity by the Securities
and Exchange Commission (SEC). Excluding the oil sands volumes, the
company's proved-reserve additions in 2006 equated to approximately 70
percent of oil-equivalent production for the year.
The company will provide additional details relating to 2006 reserve
activity in its Annual Report on Form 10-K expected to be filed with
the SEC on March 1.
Success in 2006
"We achieved success on many fronts in 2006," O'Reilly said. "Earnings for the year were a record for our company, and we operated safely and reliably. Our refineries achieved their highest utilization rate in several years. We also completed the integration of the former Unocal operations and reached a number of milestones during the year on our major capital projects. "As we begin 2007, our queue of excellent projects, strong financial position and dedicated workforce provide a solid foundation for our company's future growth," O'Reilly added. UPSTREAM - EXPLORATION AND PRODUCTION Worldwide oil-equivalent production was 2.66 million barrels per day in the fourth quarter 2006, about the same as the corresponding 2005 period. Production for the full year 2006 averaged 2.67 million barrels per day, up from 2.52 million in 2005. The increase between years was mainly attributable to 2005 having included only five months of production associated with Unocal properties that were acquired in August of that year. The average sales price per barrel of crude oil and natural gas liquids in the United States was $51 in the fourth quarter 2006, down about $1 from the corresponding period in 2005. Outside the United States, the sales price increased more than $1 to $52 per barrel. The average U.S. natural gas sales price decreased 42 percent to $5.90 per thousand cubic feet in the fourth quarter 2006, while outside the United States the average price of $3.67 per thousand cubic feet was 5 percent higher than a year earlier. U.S. Upstream
Fourth Quarter Year
Millions of Dollars 2006 2005 2006 2005
Income $886 $1,223 $4,270 $4,168
U.S. upstream income of $886 million in the fourth quarter decreased 28 percent from the corresponding period in 2005. The primary reason for the decline was a sharp drop in the average price of natural gas. Other factors included higher operating expenses and an increase in depreciation expense for wells, equipment and facilities. Partially offsetting these adverse effects on earnings was the benefit of an increase in production of crude oil and natural gas. Net oil-equivalent production of 763,000 barrels per day increased approximately 6 percent from the 2005 quarter, due mainly to restoration of volumes following the effects of hurricanes in 2005. The net liquids component of production was up 5 percent to 466,000 barrels per day. Net natural gas production was 9 percent higher at approximately 1.8 billion cubic feet per day. International Upstream
Fourth Quarter Year
Millions of Dollars 2006 2005 2006 2005
Income* $2,023 $2,027 $8,872 $7,556
* Includes foreign
currency effects $ (52) $ 5 $ (371) $ 14
International upstream earnings of approximately $2 billion were relatively unchanged from the fourth quarter 2005. While oil-equivalent production was lower in the 2006 fourth quarter, sales volumes were higher due to the timing of cargo liftings in certain producing regions. The benefit to earnings from this increase in liftings, as well as higher prices for crude oil and natural gas, was offset by increases in exploration, depreciation and operating expense. Foreign currency effects reduced earnings $52 million in the 2006 fourth quarter but increased earnings by $5 million a year earlier. Net oil-equivalent production decreased 74,000 barrels per day from the fourth quarter 2005 to 1,892,000 barrels per day. In Venezuela, the conversion of operating service agreements to joint venture arrangements resulted in a decline of about 90,000 barrels per day between the quarterly periods. Elsewhere, production was higher in Nigeria, Angola and Azerbaijan but lower in Indonesia and the United Kingdom. The net liquids component of production decreased 37,000 barrels per day to 1,381,000. Natural gas production was 3.1 billion cubic feet per day in the 2006 period, down about 200 million cubic feet per day from a year earlier. DOWNSTREAM - REFINING, MARKETING AND TRANSPORTATION
U.S. Downstream
Fourth Quarter Year
Millions of Dollars 2006 2005 2006 2005
Income $343 $385 $1,938 $980
U.S. downstream earnings of $343 million decreased by 11 percent from the 2005 quarter, mainly the result of lower average margins for refined products and higher operating expenses. Sales volumes were higher between periods, and refinery crude input was up 20,000 barrels per day to 916,000. Reported sales volumes for refined products increased 2 percent in the fourth quarter 2006 to 1,471,000 barrels per day. Effective in April 2006, a new accounting standard required certain purchase and sale contracts with the same counterparty to be netted for reporting. These types of transactions previously were reported separately as a purchase and a sale. Excluding the impact of this new accounting standard, refined-product sales volumes were up 8 percent from the 2005 fourth quarter, reflecting increased sales of gas oil and branded gasoline. International Downstream
Fourth Quarter Year
Millions of Dollars 2006 2005 2006 2005
Income* $611 $423 $2,035 $1,786
*Includes foreign
currency effects $96 $ (26) $ 98 $ (24)
International downstream earnings of $611 million in the 2006 quarter increased $188 million from the year-ago period. The increase was largely attributable to foreign exchange effects and charges in the 2005 period related to the uninsured portion of a loss due to property damage. Refined- product margins and sales volumes were lower between periods. Refinery crude input was down 53,000 barrels per day from the 2005 fourth quarter due to planned downtime at the company's refinery in the United Kingdom. Refined-product sales volumes of 2,093,000 barrels per day were 8 percent lower. Excluding the effects of the new accounting standard for purchase and sale contracts, sales volumes were down 3 percent. CHEMICALS
Fourth Quarter Year
Millions of Dollars 2006 2005 2006 2005
Income* $124 $71 $539 $298
*Includes foreign
currency effects $ (1) $ - $ (8) $ -
Chemical operations earned $124 million, compared with $71 million in the 2005 fourth quarter. Most of the increase was the result of improved margins on sales of lubricant and fuel additives by the company's Oronite subsidiary. Earnings also were higher for the company's 50 percent interest in Chevron Phillips Chemical Company LLC. ALL OTHER
Fourth Quarter Year
Millions of Dollars 2006 2005 2006 2005
(Charges) Income - Net* $(215) $15 $(516) $(689)
*Includes foreign
currency effects $ 13 $ (21) $62 $ (51)
All Other consists of the company's interest in Dynegy, mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities and technology companies. Charges in the fourth quarter 2006 were $215 million, compared with income of $15 million in the year-ago period, which included the company's share of a gain on the sale of assets by Dynegy. SALES AND OTHER OPERATING REVENUES Sales and other operating revenues in the fourth quarter were $46 billion, down from $53 billion a year earlier. Most of the decline was associated with the impact of the accounting-rule change that requires certain purchase and sale contracts with the same counterparty to be netted for reporting. For the full year 2006, sales and other operating revenues were $205 billion, compared with $194 billion in 2005. CAPITAL AND EXPLORATORY EXPENDITURES Capital and exploratory expenditures for the full year 2006, including the company's share of expenditures by affiliates, were $16.6 billion, compared with $11.1 billion in 2005. A portion of the increase was associated with expenditures for Unocal properties acquired in August 2005. The company's share of affiliates' expenditures, which did not require cash outlays by the company, was about $1.9 billion and $1.7 billion in 2006 and 2005, respectively. Upstream expenditures in 2006 were $12.8 billion, or 77 percent of the total. NOTICE Chevron's discussion of fourth quarter 2006 earnings with security analysts will take place on Friday, February 2, 2007, at 8:00 a.m. PST. A webcast of the meeting will be available in a listen-only mode to individual investors, media and other interested parties on Chevron's Web site at http://www.chevron.com/ under the "Investors" heading. Additional financial and operating information is contained in the Investor Relations Earnings Supplement that is available under "Financial Reports" on the Web site. Chevron will post selected first quarter 2007 interim company and industry performance data on its Web site on Tuesday, April 10, 2007, at 2:00 p.m. PDT. Interested parties may view this interim data at http://www.chevron.com/ under the "Investors" heading. CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This press release of Chevron Corporation contains forward-looking statements relating to Chevron's operations that are based on management's current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words such as "anticipates," "expects," "intends," "plans," "targets," "projects," "believes," "seeks," "schedules," "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 and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. The reader should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, Chevron undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Among the important factors that could cause actual results to differ materially from those in the forward-looking statements 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; the results of operations and financial condition of equity affiliates; inability or failure of the company's joint-venture partners to fund their share of operations and development activities; potential failure to achieve expected net production from existing and future crude oil and natural gas development projects; potential delays in the development, construction or start-up of planned projects; potential disruption or interruption of the company's net production or manufacturing facilities or delivery/transportation networks due to war, accidents, political events, civil unrest or severe weather; potential liability for remedial actions under existing or future environmental regulations and litigation; significant investment or product changes under existing or future environmental statutes, regulations and litigation; potential liability resulting from pending or future litigation; the company's acquisition or disposition of assets; government mandated sales, divestitures, recapitalizations, changes in fiscal terms or restrictions on scope of company operations; the effects of changed accounting rules under generally accepted accounting principles promulgated by rule-setting bodies; and the factors set forth under the heading "Risk Factors" on pages 31 and 32 of the company's 2005 Annual Report on Form 10-K. 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. This press release also contains a discussion of the company's crude oil and natural gas reserves. Included are statements about activities at the Athabasca Oil Sands Project in Alberta, Canada. The SEC definition of oil and gas reserves does not include reserves extracted through the bitumen-mining process. CHEVRON CORPORATION - FINANCIAL REVIEW
(Millions of Dollars, Except Per-Share Amounts)
CONSOLIDATED STATEMENT OF INCOME
(unaudited) Three Months Year Ended
Ended December 31 December 31
REVENUES AND OTHER INCOME 2006 2005 2006 2005
Sales and other operating
revenues (1) (2) $46,238 $52,457 $204,892 $193,641
Income from equity
affiliates 1,079 1,110 4,255 3,731
Other income 429 227 971 828
Total Revenues and Other
Income 47,746 53,794 210,118 198,200
COSTS AND OTHER DEDUCTIONS
Purchased crude oil and
products, operating and
other expenses (2) 33,500 39,679 149,232 145,730
Depreciation, depletion
and amortization 1,988 1,725 7,506 5,913
Taxes other than on
income (1) 5,533 5,063 20,883 20,782
Interest and debt expense 92 135 451 482
Minority interests 2 33 70 96
Total Costs and Other
Deductions 41,115 46,635 178,142 173,003
Income Before Income Tax
Expense 6,631 7,159 31,976 25,197
Income tax expense 2,859 3,015 14,838 11,098
NET INCOME $3,772 $4,144 $17,138 $14,099
PER-SHARE OF COMMON STOCK
Net Income - Basic $1.75 $1.88 $7.84 $6.58
- Diluted $1.74 $1.86 $7.80 $6.54
Dividends $0.52 $0.45 $2.01 $1.75
Weighted Average Number of
Shares Outstanding (000's)
- Basic 2,156,781 2,255,125 2,186,161 2,144,188
- Diluted 2,168,852 2,235,585 2,196,924 2,154,728
(1) Includes excise,
value-added and other
similar taxes. $2,498 $2,173 $9,551 $8,719
(2) Includes amounts in
revenues for buy/sell
contracts with the same
counterparty for periods
prior to second quarter
2006. (Associated costs
are included in
Purchased crude oil and
products, operating
and other expenses.)
The company adopted a new
accounting rule effective
April 1, 2006, that
requires these types of
transactions to be netted
in the income statement. $- $5,897 $6,725 $23,822
CHEVRON CORPORATION - FINANCIAL REVIEW
(Millions of Dollars)
INCOME BY MAJOR OPERATING AREA Three Months Year Ended
(unaudited) Ended December 31 December 31
2006 2005 2006 2005
Upstream - Exploration and Production
United States $886 $1,223 $4,270 $4,168
International 2,023 2,027 8,872 7,556
Total Upstream 2,909 3,250 13,142 11,724
Downstream - Refining, Marketing
and Transportation
United States 343 385 1,938 980
International 611 423 2,035 1,786
Total Downstream 954 808 3,973 2,766
Chemicals 124 71 539 298
All Other (1) (215) 15 (516) (689)
Net Income $3,772 $4,144 $17,138 $14,099
SELECTED BALANCE SHEET AND OTHER DATA
Dec. 31, 2006 Dec. 31, 2005
(unaudited)
Cash and Cash Equivalents $10,493 $10,043
Marketable Securities $953 $1,101
Total Assets $132,628 $125,833
Total Debt $9,838 $12,870
Stockholders' Equity $68,935 $62,676
Total Debt/Total Debt plus Equity 12.5% 17.0%
Return on Average Capital Employed
- Year Ended 23% 22%
Common Stock Purchases
Year Ended December 31, 2006: $5,000
Three Months Ended December 31, 2006: $1,300
Three Months Year Ended
CAPITAL AND EXPLORATORY Ended December 31 December 31
EXPENDITURES(2)(3) 2006 2005 2006 2005
United States
Upstream - Exploration and
Production $1,116 $834 $4,123 $2,450
Downstream - Refining, Marketing
and Transportation 453 313 1,176 818
Chemicals 60 28 146 108
Other 136 106 403 329
Total United States 1,765 1,281 5,848 3,705
International
Upstream - Exploration and
Production 2,733 2,086 8,696 5,939
Downstream - Refining, Marketing
and Transportation 597 571 1,999 1,332
Chemicals 22 19 54 43
Other 7 19 14 44
Total International 3,359 2,695 10,763 7,358
Worldwide $5,124 $3,976 $16,611 $11,063
(1) Includes the company's
interest in Dynegy, mining
operations of coal and
other minerals, power
generation businesses,
worldwide cash management
and debt financing activities,
corporate administrative
functions, insurance
operations, real estate
activities, and technology
companies.
(2) Includes interest in
affiliates: (3)
United States $73 $57 $206 $183
International 585 481 1,713 1,498
Total $658 $538 $1,919 $1,681
(3) 2005 conformed to 2006 presentation.
CHEVRON CORPORATION - FINANCIAL REVIEW
Three Months Year Ended
OPERATING STATISTICS (1) Ended December 31 December 31
NET LIQUIDS PRODUCTION 2006 2005 2006 2005
(MB/D):
United States 466 444 462 455
International 1,346 1,271 1,270 1,214
Worldwide 1,812 1,715 1,732 1,669
NET NATURAL GAS PRODUCTION
(MMCF/D): (2)
United States 1,782 1,638 1,810 1,634
International 3,067 3,289 3,146 2,599
Worldwide 4,849 4,927 4,956 4,233
OTHER PRODUCED VOLUMES-
INTERNATIONAL (MB/D):(3) 35 147 109 143
TOTAL NET OIL-EQUIVALENT
PRODUCTION (MB/D): (3) (4)
United States 763 717 763 727
International 1,892 1,966 1,904 1,790
Worldwide 2,655 2,683 2,667 2,517
SALES OF NATURAL GAS
(MMCF/D): (5)
United States 6,973 5,380 7,051 5,449
International 3,580 3,049 3,478 2,450
Worldwide 10,553 8,429 10,529 7,899
SALES OF NATURAL GAS
LIQUIDS (MB/D): (5)
United States 133 94 124 151
International 109 134 102 120
Worldwide 242 228 226 271
SALES OF REFINED PRODUCTS
(MB/D): (1) (5) (6)
United States 1,471 1,443 1,494 1,473
International 2,093 2,270 2,127 2,252
Worldwide 3,564 3,713 3,621 3,725
REFINERY INPUT (MB/D):
United States 916 896 939 845
International 987 1,040 1,047 1,038
Worldwide 1,903 1,936 1,986 1,883
(1) Includes interest
in affiliates.
(2) Includes natural gas
consumed on lease
(MMCF/D):
United States 67 32 56 48
International (5) 434 419 419 356
(3) Other produced volumes
- International (MB/D):
Athabasca Oil Sands
(Canada) 35 35 27 32
Boscan Operating
Service Agreement
(Venezuela) - 112 82 111
35 147 109 143
(4) Oil-equivalent
production is the
sum of net liquids
production, net
natural gas
production and other
produced liquids.
The oil-equivalent
gas conversion
ratio is 6,000 cubic
feet of natural
gas = 1 barrel of
crude oil.
(5) 2005 conformed to
2006 presentation.
(6) Includes volumes for
buy/sell contracts
(MB/D): * (5)
United States - 81 26 88
International - 113 24 129
Total - 194 50 217
* The company adopted a new accounting rule effective April 1, 2006,
related to buy/sell contracts with the same counterparty. Previously,
transactions for these contracts were reported as both a purchase and
sale. The new accounting requires the transactions to be netted,
resulting in no volumes from these transactions reported as "Sales of
refined products" for periods beginning in the second quarter 2006.
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