Chevron Press Release - Chevron 1993 Earnings Up 38 Percent Before Special Items
SAN FRANCISCO, Jan. 25, 1994 -- Chevron Corporation today reported preliminary net income for the year 1993 of $1.265 billion, or $3.89 per share, a decrease of 19 percent from 1992's net income of $1.569 billion, or $4.63 per share.
Adjusting for special items in both years and the cumulative effect of 1992 accounting changes, 1993 earnings were $2.148 billion up 38 percent from $1.559 billion in 1992.
Commenting on the year's results, Board Chairman and CEO Ken Derr said, "We had an excellent year operationally, especially considering the low level of crude oil prices during the latter part of the year. Higher U.S. natural gas prices and strong worldwide refined product sales margins helped offset the effect of the fall in crude prices, but the primary factor in our improved results was the success of our cost reduction efforts.
"Our 1993 ongoing operating and administrative costs declined $.40 a barrel from 1992 and equated to about $6.51 per barrel," continued Derr. "And when compared to our base measurement year of 1991, we have reduced costs about $.95 per barrel, exceeding our goal of $.75. Our reductions are proving to be sustainable and we are aiming for further savings this year. This effort by our employees has been instrumental in improving our profitability".
Earnings in 1993 included special charges amounting to $883 million, due largely to a $543 million second quarter restructuring charge for the company's U.S. downstream operations. Net income for 1992 was largely unaffected by special and nonrecurring items as benefits of $651 million from special items, mostly gains from property dispositions in the U.S. upstream operations, were offset by a $641 million charge related to the cumulative effect of adopting two new accounting standards.
Fourth quarter net income of $294 million, or $.91 per share, was reduced by special items totaling $221 million, mostly related to the recently announced one-time cash bonus to employees, net losses on asset sales and write-offs, LIFO inventory liquidation losses, prior-year tax adjustments, and environmental remediation provisions. Fourth quarter 1992 earnings of $1.088 billion, or $3.30 per share, included benefits of $546 million from special items, primarily gains from asset dispositions.
Excluding special items, fourth quarter 1993 earnings of $515 million declined 5 percent from comparably adjusted earnings of $542 million in the fourth quarter of 1992. This earnings level marked the fifth consecutive quarter that results from ongoing operations topped the $500 million level.
Addressing fourth quarter results, Derr noted that industry conditions deteriorated sharply. "Not only did crude prices end the year at their lowest level in over five years, U.S. refined product prices fell in December, hurting sales margins. Nevertheless, we maintained our strong earnings level on the strength of the company's international operations, both upstream and downstream, and our improved cost structure. In a commodity oriented business such as ours, price fluctuations are a fact of life," said Derr. "To be competitive, we have to be low-cost.
"Year-end 1993 marked the end of a five-year objective we set in early 1989. We declared our mission was to provide superior financial results for our stockholders and set a goal to have the highest total stockholder return -- stock appreciation plus dividend payments -- of the major U.S. oil companies.
"To achieve this, we embarked upon an aggressive program to restructure our businesses, improve management decision making and accountability, shed marginal and non-core assets, reduce operating costs, improve work processes, and through selective investments, position the company for long-term growth. We succeeded. Over the 1989-1993 period, Chevron's total annual stockholder return averaged 18.9 percent, the best among our peer group," concluded Derr.
Total revenues for 1993 were $37.1 billion, a decrease of 7 percent from 1992 revenues of $39.7 billion. Fourth quarter revenues of $8.9 billion were 16 percent lower than 1992 fourth quarter revenues of $10.7 billion. The declines for both periods were due principally to lower crude oil and refined product prices.
Foreign currency gains were $46 million and $90 million for the years 1993 and 1992, respectively. For the fourth quarters, foreign currency gains were $4 million in 1993 and $36 million in 1992.
Exploration and Production
U.S. exploration and production net earnings of $566 million for the year 1993 included $136 million of special charges, of which $92 million were included in fourth quarter earnings of $39 million. These special charges included prior-year income tax adjustments, losses on asset sales, the one-time bonus to employees and environmental clean-up provisions. In 1992, net earnings of $1.043 billion and fourth quarter earnings of $618 million were increased by special gains of $413 million and $368 million, respectively, mostly relating to asset dispositions.
Excluding special items, earnings improved for the year, but declined in the fourth quarter, when the fall in crude oil prices accelerated and natural gas prices were not as strong as in the prior-year quarter. For the year, the effect of lower crude oil prices and lower crude oil production was more than offset by higher natural gas prices and lower operating expenses. Depreciation expense declined in line with lower production, and exploration expense decreased on fewer well write-offs and lower exploration activity.
In 1993, the company's average crude oil realization declined almost $2.00 per barrel to $14.58; for the fourth quarter, the average was $12.75, down nearly $4.00 from the 1992 fourth quarter. Natural gas prices in 1993 averaged about $2.00 per thousand cubic feet for the year and fourth quarter, compared with $1.70 and $2.25 for the 1992 year and fourth quarter, respectively.
Net liquids production for the year averaged 394,000 barrels per day, 9 percent less than 1992's 432,000 barrels per day. For the fourth quarter, net liquids production of 388,000 barrels per day declined from the 398,000 barrels per day produced in the 1992 fourth quarter. Net natural gas production for the 1993 year and fourth quarter was about 2.1 billion cubic feet per day, down from 2.3 billion cubic feet per day for the year 1992 but flat with the prior-year fourth quarter. The 1993 production declines were primarily due to 1992 fourth quarter producing property dispositions.
International exploration and production net earnings were $580 million for the year and $160 million for the fourth quarter, compared with $594 million and $72 million for the 1992 year and fourth quarter, respectively. The 1993 periods included special items that reduced reported results by $61 million for the year, but increased fourth quarter earnings $8 million. Prior-year tax adjustments and asset write-offs during the year were partly offset by an asset sale gain in the fourth quarter. In 1992, special items increased annual earnings $14 million, but reduced fourth quarter earnings $20 million.
Excluding special items, earnings increased for the year and fourth quarter as increased production levels and lower operating costs more than offset lower crude oil prices. Because of the terms of the operating agreements in several countries in which the company produces, fluctuations in crude oil prices have less impact on earnings than in the United States. Also, exploration expense declined for the year, but increased in the fourth quarter from higher well write-offs.
For the year 1993, net liquids production increased almost 9 percent to 556,000 barrels per day, and was up over 10 percent to 580,000 barrels per day in the fourth quarter. Net natural gas production was up slightly for the year, but declined in the fourth quarter. The company's increased focus on international opportunities is showing results: 1993 production reflects a full year of operations in Papua New Guinea, the second quarter start-up of the Tengiz joint venture, and increased output from ongoing development projects in Indonesia. Production from the company's North Sea Alba field began in January 1994.
International upstream results in 1993 included foreign currency gains of $57 million and $13 million for the year and fourth quarter; in 1992, foreign currency gains were $80 million for the year and $7 million for the fourth quarter.
Refining and Marketing
U.S. refining and marketing operations reported a loss of $170 million for the year 1993, after restructuring charges and other special items totaling $725 million. In addition to a $543 million restructuring charge for the planned sales of two refineries, other special charges included environmental remediation provisions, LIFO inventory liquidation losses, prior-year tax adjustments, the one-time employee bonus, and other miscellaneous adjustments. Fourth quarter earnings of $73 million included $77 million of these special charges.
In 1992, U.S. downstream operations earned $297 million, including $101 million in the fourth quarter. Special items in 1992, mainly environmental provisions and LIFO inventory liquidation losses, reduced earnings $53 million for the year and $55 million for the fourth quarter.
Excluding special items, 1993 earnings of $555 million increased significantly from $350 million earned in 1992. However, comparably adjusted fourth quarter 1993 earnings of $150 million declined slightly from $156 million in the prior-year quarter. Although average product prices declined from the prior year, lower crude oil prices, lower operating costs, and stronger markets resulted in higher average sales margins for the year. Late in the year, margins declined somewhat as product prices declined faster than crude oil prices. Product sales volumes declined 3 percent for the year and 5 percent in the fourth quarter.
International refining and marketing 1993 net earnings increased to $252 million from $111 million in 1992. Fourth quarter 1993 earnings were $73 million compared with $28 million in the prior-year fourth quarter. Special items increased the year's results by a net $1 million, but reduced fourth quarter results $13 million. In 1992, special items reduced annual and fourth quarter earnings $3 million and $8 million, respectively.
International downstream operations improved significantly for the year and fourth quarter as product sales margins recovered from the prior-year's weak levels in all the company's marketing areas -- Canada, the United Kingdom and in the Caltex areas of operations, especially South Africa and Singapore. Also, the company's international trading results improved significantly. Sales volumes increased for the year and fourth quarter on strong demand and higher trading volumes.
Lower crude oil and operating costs coupled with stronger markets boosted sales margins in 1993; however, annual and fourth quarter operating results were reduced $52 million and $36 million, respectively, by Chevron's share of Caltex adjustments to the carrying value of its petroleum inventories to reflect market values. Earnings for the 1993 year included foreign currency gains of $2 million; however, fourth quarter results were reduced by $12 million of foreign currency losses. In 1992, foreign currency gains were $13 million for the year, of which $1 million occurred in the fourth quarter.
Chemicals earned $143 million in 1993 compared with $89 million in 1992. In both years, most of the earnings comprised special gains, mainly from asset sales, totaling $112 million in 1993 and $53 million in 1992. Fourth quarter results were losses of $22 million in 1993 and $5 million in 1992. Quarterly results included special charges of $14 million and $1 million in the 1993 and 1992 periods, respectively.
Chemicals results, excluding special items, reflected the continuing depressed state of the petrochemicals industry, especially olefins. Industry overcapacity, coupled with weak worldwide economies, have held down product prices.
Coal and Other Minerals
Coal and other minerals earnings were $44 million in 1993, down from $198 million in 1992, which included a $159 million fourth quarter special gain from an asset sale. Fourth quarter earnings were $6 million in 1993 and $170 million in 1992. Fourth quarter earnings in 1993 were reduced by special charges totaling $5 million.
Operationally, a decline in coal earnings for the year was more than offset by lower non-coal exploration expenses. Coal sales exceeded 20 million tons for the first time, but margins declined on lower prices.
Corporate and Other
Corporate and other operations incurred net charges of $150 million in the year 1993, including $35 million in the fourth quarter. The 1993 year and fourth quarter included net special charges of $74 million and $28 million, respectively, relating primarily to litigation provisions and pension settlement losses partially offset by favorable prior-year tax adjustments. In 1992, corporate and other incurred charges of $122 million for the year, but recorded earnings of $104 million in the fourth quarter, when favorable prior-year tax adjustments and pension settlement gains totaling $103 million were recognized. For the year 1992, the fourth quarter benefits were partially offset by employee severance and litigation provisions recorded in earlier quarters, resulting in net special benefits of $68 million.
Interest expense declined for the year and quarter on both lower average interest rates and lower debt levels.
Capital and Exploratory Expenditures
Worldwide capital and exploratory expenditures, including the company's share of affiliates' expenditures, were $1.6 billion in the fourth quarter and $4.4 billion for the year 1993, about the same spending level as for the year 1992. Exploration and production spending totaled about $2.4 billion, of which 68 percent was in international areas.
Updated: January 1994