Chevron Press Release - Chevron Announces First Quarter Earnings Of $388 Million
SAN FRANCISCO, April 26, 1994 -- Chevron Corporation today reported first quarter net income of $388 million ($1.19 per share), down 23 percent from $501 million ($1.54 per share) earned in the first quarter of 1993.
Special charges reduced 1994 reported earnings by $36 million, versus a net reduction of $2 million from special items in the prior-year first quarter. Excluding the special charges, earnings of $424 million ($1.30 per share) were 16 percent lower than 1993's strong first quarter results.
"Our results were hurt by low crude oil prices and refinery downtime," said Chairman and CEO Ken Derr. "Our U.S. crude oil realizations averaged about $4.00 per barrel less than in last year's first quarter. Although industry product sales margins were strong, our U.S. downstream earnings were relatively flat. Planned and unplanned refinery downtime squeezed our product sales margins, particularly in March.
"On the plus side, international production volumes continued to increase, U.S. natural gas prices were higher, and our international downstream earnings improved on higher product sales margins.
"And, most important, we're continuing to keep our costs under control", added Derr. "Ongoing operating and administrative costs of $6.47 per barrel were 5 cents less than in the first quarter of 1993. We've now lowered our cost structure about $1.00 per barrel since 1991, and our current goal is to achieve a 25 cents reduction in 1994. Cost reductions have had a pronounced impact on our financial results."
Derr said, "We're continuing to make progress on our U.S. downstream restructuring. As announced, we are negotiating with buyers for our Philadelphia and Port Arthur refineries, and we hope to have both sales completed this year."
Total revenues for the quarter were $8.3 billion, down from $9.1 billion in last year's first quarter, reflecting lower prices for refined products and crude oil.
Exploration and Production
U.S. exploration and production net earnings fell to $124 million from the $195 million earned in the 1993 first quarter. Average crude oil realizations of $11.56 per barrel were $4.07 lower than in last year's first quarter. Net liquids production declined 6 percent to 373,000 barrels per day due to natural field declines, property sales and maintenance. Also, exploration expense increased because of unsuccessful well write-offs.
Higher natural gas prices and volumes partially mitigated the decline in crude prices. Average natural gas prices increased $.30 per thousand cubic feet to $2.13. Net natural gas production volumes were up 5 percent to 2.2 billion cubic feet per day due to new production and strong demand.
The 1994 first quarter results were reduced by a $15 million reserve adjustment for the resolution of a regulatory issue; the 1993 quarter included an asset write-off of $12 million.
International exploration and production net earnings for the quarter declined to $111 million from $165 million earned in last year's first quarter, which included a $19 million favorable prior-year tax adjustment.
The earnings decline caused by lower crude oil prices in 1994 was partially offset by a 13 percent increase in net liquids production volumes to 603,000 barrels per day. New field production in the North Sea and Nigeria, coupled with the 1993 second quarter start-up of joint venture operations in Kazakhstan, contributed to the increased 1994 volumes. Also, natural gas production increased 11 percent to 531 million cubic feet per day.
Refining and Marketing
U.S. refining and marketing earnings were $98 million compared with $100 million in the first quarter of 1993. Both quarters included charges for environmental remediation - $21 million in 1994 and $14 million in 1993.
Average refined product prices did not fall as much as crude oil costs. This benefit to sales margins was mostly offset by the impact of scheduled and unscheduled refinery downtime, which resulted in higher operating costs and required more costly third-party product purchases to supply the company's marketing system. Total sales volumes fell 7 percent, although sales of gasolines rose slightly.
International refining and marketing net earnings increased to $63 million from $22 million. Compared to the prior-year first quarter, product sales margins were higher and the company's trading results improved. Sales volumes increased 9 percent, reflecting higher volumes in both marketing and trading operations.
Chemicals earnings were $26 million, up from $18 million in the first quarter of 1993. Although the petrochemicals industry remains depressed, some improvement has occurred with the strengthening of the U.S. economy. Results in 1993 included earnings from the consumer products business, which was sold in last year's second quarter.
Coal and Other Minerals
Coal and other minerals first quarter earnings were $15 million, down from $20 million in the corresponding quarter last year, which included a $5 million asset sale gain. Operating results were flat year-to-year.
Corporate and Other
Corporate and other incurred net charges of $49 million compared with charges of $19 million in the 1993 first quarter.
In 1994, the company changed its method of distributing certain corporate expenses to its business segments. As a result, corporate and other charges in 1994 include approximately $20 million that, under the previous method, would have been allocated to the various segments. This change had no net income effect and no significant effect on any individual segment's results, nor did it affect any segment operational trends. Also, in 1994 the company adopted a new accounting standard for postemployment benefits, the effect of which was not material to net income.
Capital and Exploratory Expenditures
Capital and exploratory expenditures, including the company's share of affiliates' expenditures, were $1.059 billion in the first quarter, up 36 percent from $778 million spent in the first quarter of 1993. The increase was due to expenditures for the development of the Tengiz oil field in Kazakhstan and for refinery construction and expansion projects by the company's Caltex affiliate.
Updated: April 1994