Although each subsidiary of Chevron is responsible for its own affairs, Chevron Corporation manages its investments in these subsidiaries and their affiliates. For this purpose, the investments are grouped as follows: upstream — exploration and production; downstream — refining, marketing and transportation; chemicals; and all other. The first three of these groupings represent the company's "reportable segments" and "operating segments" as defined in Financial Accounting Standards Board (FASB) Statement No. 131, Disclosures About Segments of an Enterprise and Related Information (FAS 131).
The segments are separately managed for investment purposes under a structure that includes "segment managers" who report to the company's "chief operating decision maker" (CODM) (terms as defined in FAS 131). The CODM is the company's Executive Committee, a committee of senior officers that includes the Chief Executive Officer and that, in turn, reports to the Board of Directors of Chevron Corporation.
The operating segments represent components of the company as described in FAS 131 terms that engage in activities (a) from which revenues are earned and expenses are incurred; (b) whose operating results are regularly reviewed by the CODM, which makes decisions about resources to be allocated to the segments and to assess their performance; and (c) for which discrete financial information is available.
Segment managers for the reportable segments are accountable directly to and maintain regular contact with the company's CODM to discuss the segment's operating activities and financial performance. The CODM approves annual capital and exploratory budgets at the reportable segment level, as well as reviews capital and exploratory funding for major projects and approves major changes to the annual capital and exploratory budgets. However, business-unit managers within the operating segments are directly responsible for decisions relating to project implementation and all other matters connected with daily operations. Company officers who are members of the Executive Committee also have individual management responsibilities and participate in other committees for purposes other than acting as the CODM.
"All Other" activities include the company's interest in Dynegy (through May 2007, when Chevron sold its interest), mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, alternative fuels, and technology companies.
The company's primary country of operation is the United States of America, its country of domicile. Other components of the company's operations are reported as "International" (outside the United States).
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 company on a worldwide basis. Corporate administrative costs and assets are not allocated to the operating segments. However, operating segments are billed for the direct use of corporate services. Nonbillable costs remain at the corporate level in "All Other." After-tax segment income by major operating area is presented in the following table:
|
Year ended December 31 |
|
2007 |
2006 |
2005 |
| Income by Major Operating Area |
|
|
| Upstream |
|
|
| United States |
$4,532 |
$4,270 |
$4,168 |
| International |
10,284 |
8,872 |
7,556 |
| Total Upstream |
14,816 |
13,142 |
11,724 |
| Downstream |
|
|
| United States |
966 |
1,938 |
980 |
| International |
2,536 |
2,035 |
1,786 |
| Total Downstream |
3,502 |
3,973 |
2,766 |
| Chemicals |
|
|
| United States |
253 |
430 |
240 |
| International |
143 |
109 |
58 |
| Total Chemicals |
396 |
539 |
298 |
| Total Segment Income |
18,714 |
17,654 |
14,788 |
| All Other |
|
|
| Interest expense |
(107) |
(312) |
(337) |
| Interest income |
385 |
380 |
266 |
| Other |
(304) |
(584) |
(618) |
| Net Income |
$18,688 |
$17,138 |
$14,099 |
Segment Assets
Segment assets do not include intercompany investments or intercompany receivables. Segment assets at year‑end 2007 and 2006 are as follows:
|
At December 31 |
|
2007 |
2006 |
| * "All Other" assets consist primarily of worldwide cash, cash equivalents and marketable securities, real estate, information systems, the company's investment in Dynegy prior to its disposition in 2007, mining operations, power generation businesses, technology companies, and assets of the corporate administrative functions. |
| Upstream |
|
|
| United States |
$23,535 |
$20,727 |
| International |
61,049 |
51,844 |
| Goodwill |
4,637 |
4,623 |
| Total Upstream |
89,221 |
77,194 |
| Downstream |
|
|
| United States |
16,790 |
13,482 |
| International |
26,075 |
22,892 |
| Total Downstream |
42,865 |
36,374 |
| Chemicals |
|
|
| United States |
2,484 |
2,568 |
| International |
870 |
832 |
| Total Chemicals |
3,354 |
3,400 |
| Total Segment Assets |
135,440 |
116,968 |
| All Other* |
|
|
| United States |
6,847 |
8,481 |
| International |
6,499 |
7,179 |
| Total All Other |
13,346 |
15,660 |
| Total Assets – United States |
49,656 |
45,258 |
| Total Assets – International |
94,493 |
82,747 |
| Goodwill |
4,637 |
4,623 |
| Total Assets |
$148,786 |
$132,628 |
Segment Sales and Other Operating Revenues
Operating segment sales and other operating revenues, including internal transfers, for the years 2007, 2006 and 2005 are presented in the following table. Products are transferred between operating segments at internal product values that approximate market prices.
Revenues for the upstream segment are derived primarily from the production and sale of crude oil and natural gas, as well as the sale of third-party production of natural gas. Revenues for the downstream segment are derived from the refining and marketing of petroleum products, such as gasoline, jet fuel, gas oils, kerosene, lubricants, 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. Revenues for the chemicals segment are derived primarily from the manufacture and sale of additives for lubricants and fuel. "All Other" activities include revenues from mining operations of coal and other minerals, power generation businesses, insurance operations, real estate activities, and technology companies.
Other than the United States, no single country accounted for 10 percent or more of the company's total sales and other operating revenues in 2007.
|
Year ended December 31 |
|
2007 |
2006 |
2005 |
* Includes buy/sell contracts of $6,725 in 2006 and $23,822 in 2005. Substantially all of the amounts in each period relate to the downstream segment. Refer to Note 13 for a discussion of the company's accounting for buy/sell contracts. |
| Upstream |
|
|
| United States |
$18,736 |
$18,061 |
$16,044 |
| Intersegment |
11,625 |
10,069 |
8,651 |
| Total United States |
30,361 |
28,130 |
24,695 |
| International |
15,213 |
14,560 |
10,190 |
| Intersegment |
19,647 |
17,139 |
13,652 |
| Total International |
34,860 |
31,699 |
23,842 |
| Total Upstream |
65,221 |
59,829 |
48,537 |
| Downstream |
|
|
| United States |
70,535 |
69,367 |
73,721 |
| Excise and similar taxes |
4,990 |
4,829 |
4,521 |
| Intersegment |
491 |
533 |
535 |
| Total United States |
76,016 |
74,729 |
78,777 |
| International |
97,178 |
91,325 |
83,223 |
| Excise and similar taxes |
5,042 |
4,657 |
4,184 |
| Intersegment |
38 |
37 |
14 |
| Total International |
102,258 |
96,019 |
87,421 |
| Total Downstream |
178,274 |
170,748 |
166,198 |
| Chemicals |
|
|
| United States |
351 |
372 |
343 |
| Excise and similar taxes |
2 |
2 |
– |
| Intersegment |
235 |
243 |
241 |
| Total United States |
588 |
617 |
584 |
| International |
1,143 |
959 |
760 |
| Excise and similar taxes |
86 |
63 |
14 |
| Intersegment |
142 |
160 |
131 |
| Total International |
1,371 |
1,182 |
905 |
| Total Chemicals |
1,959 |
1,799 |
1,489 |
| All Other |
|
|
| United States |
757 |
653 |
597 |
| Intersegment |
760 |
584 |
514 |
| Total United States |
1,517 |
1,237 |
1,111 |
| International |
58 |
44 |
44 |
| Intersegment |
31 |
23 |
26 |
| Total International |
89 |
67 |
70 |
| Total All Other |
1,606 |
1,304 |
1,181 |
| Segment Sales and Other Operating Revenues |
|
|
| United States |
108,482 |
104,713 |
105,167 |
| International |
138,578 |
128,967 |
112,238 |
| Total Segment Sales and Other Operating Revenues |
247,060 |
233,680 |
217,405 |
| Elimination of intersegment sales |
(32,969) |
(28,788) |
(23,764) |
| Total Sales and Other Operating Revenues* |
$214,091 |
$204,892 |
$193,641 |
Segment Income Taxes
Segment income tax expense for the years 2007, 2006 and 2005 are as follows:
|
Year ended December 31 |
|
2007 |
2006 |
2005 |
| Upstream |
|
|
| United States |
$2,541 |
$2,668 |
$2,330 |
| International |
11,307 |
10,987 |
8,440 |
| Total Upstream |
13,848 |
13,655 |
10,770 |
| Downstream |
|
|
| United States |
520 |
1,162 |
575 |
| International |
400 |
586 |
576 |
| Total Downstream |
920 |
1,748 |
1,151 |
| Chemicals |
|
|
| United States |
6 |
213 |
99 |
| International |
36 |
30 |
25 |
| Total Chemicals |
42 |
243 |
124 |
| All Other |
(1,331) |
(808) |
(947) |
| Total Income Tax Expense |
$13,479 |
$14,838 |
$11,098 |
Other Segment Information
Additional information for the segmentation of major equity affiliates is contained in Note 11. Information related to properties, plant and equipment by segment is contained in Note 12.