press release

Chevron Press Release - Chevron Announces Second Quarter Earnings Of $257 Million

SAN FRANCISCO, July 26, 1994 -- Chevron Corporation today reported second quarter net income of $257 million ($.39 per share). In last year's second quarter a $515 million special charge was recorded, mostly related to restructuring the company's U.S. refining and marketing operations, which reduced net income to $50 million ($.08 per share). Net income in the 1994 second quarter was reduced by $5 million of special charges.

Excluding special items in both quarters, 1994 earnings were $262 million ($.40 per share) compared with 1993's strong second quarter operating results of $565 million ($.87 per share).

Net income for the first six months of 1994 was $645 million ($.99 per share), up 17 percent from $551 million ($.85 per share) reported for the 1993 first half. The 1994 six months results were reduced by $41 million of special charges; the 1993 period included special charges totaling $517 million, related primarily to the restructuring of the U.S. refining and marketing operations.

"We were extremely disappointed in our refining and marketing results for the quarter, especially in the U.S. where our downstream operations lost $42 million," said Chairman and CEO Ken Derr. "The major factor in our low earnings was the deterioration in the refining margins in our downstream business. We also experienced some operational problems at our core U.S. refineries. Our Pascagoula refinery was impacted by a fire which put its FCC unit out of operation for nearly two months and our two key West Coast refineries both experienced problems. Finally, our results were affected by charges for the estimated uninsured costs of the inadvertent contamination of aviation gasoline by small quantities of jet fuel distributed in Northern California in May.

"Industry margins were severely squeezed by the rapid rise in crude oil prices that occurred during the quarter," said Derr. "In the U.S., for example, our average crude oil prices rose about $3.00 per barrel from the first quarter, yet our average refined product prices increased only slightly more than $1.00 per barrel because of market lags in recovering the higher costs, particularly in the East.

"We began to see some signs of improvement in June," continued Derr. "In recent weeks, product prices have strengthened and appear to be better reflecting their raw material costs. If this trend continues, the improvement in our downstream operations, coupled with higher crude prices in our upstream operations, should result in stronger earnings during the second half of this year."

Derr noted that aside from downstream activities, most of the company's operations improved compared with the first quarter of this year. However, worldwide upstream earnings were not as strong as last year due to lower oil and gas prices. Even with the rapid run-up in crude oil prices that occurred during the quarter, the company's average oil prices in the United States were still $1.63 per barrel lower than in the year-ago quarter. International liquids production was up 67,000 barrels per day, or 12 percent, which drove worldwide oil and gas production volumes to over 1.4 million equivalent barrels per day.

Derr continued, "A bright spot in our results was the significant improvement in chemicals, where quarterly earnings, excluding special items, were the highest in more than three years. We believe our chemicals business is well positioned to benefit from improving industry conditions."

Operating expenses for the second quarter were $6.96 per barrel, up 29 cents from the second quarter of 1993. Year-to-date expense was $6.71 versus $6.60 in the 1993 year-to-date period. Derr said, "Refinery problems had a major impact on first half 1994 operating expenses. However, despite the increased costs associated with these problems, we expect annual operating cost savings versus 1991 to be over $1 billion. Cost awareness has become a way of life at Chevron, and we are determined to further reduce our cost structure by continuing the programs we've put in place."

Total revenues were $8.8 billion in the 1994 second quarter, down from $9.9 billion in last year's second quarter. Total revenues for the first six months were $17.1 billion, compared with $18.9 billion in 1993's first half. Revenues declined on lower prices for crude oil and refined products.

Foreign exchange losses totaling $21 million were included in both the second quarter and first half net income. In contrast, the comparable prior-year quarter and six months included foreign exchange gains of $37 million and $33 million, respectively.

Exploration and Production

U.S. exploration and production net earnings declined to $152 million in the second quarter from the $207 million earned in the 1993 second quarter. Although average crude oil realizations increased sharply from the first quarter of 1994, they were still below last year's second quarter. Average crude oil realizations were $14.34 per barrel, compared with $15.97 per barrel in the 1993 second quarter. Lower natural gas prices also contributed to the lower earnings. The company's average natural gas sales price declined to $1.79 per thousand cubic feet from $2.06 in last year's second quarter, when prices were unseasonably strong.

Net liquids production for the quarter declined 7 percent to 371,000 barrels per day, largely due to normal field declines, but net natural gas production volumes were up 6 percent to 2.1 billion cubic feet per day, as new production in the Gulf of Mexico more than offset normal field declines.

International exploration and production net earnings for the quarter were $134 million compared with $142 million in the prior-year second quarter, which included $26 million of special charges for prior-year tax adjustments and asset write-offs.

The benefit of higher production volumes did not fully offset lower crude oil prices. Net liquids production increased 12 percent to 613,000 barrels per day. New field production in the North Sea and Nigeria and increased production in Indonesia and Kazakhstan contributed to the higher 1994 volumes. Also, natural gas production was up 5 percent to 519 million cubic feet per day.

Foreign exchange losses were $5 million, compared with gains of $21 million in the prior year second quarter.

Refining and Marketing

U.S. refining and marketing operations lost $42 million in the 1994 second quarter, compared with earnings of $97 million in the 1993 second quarter before special charges of $604 million, mostly related to a restructuring provision. Results for the current year quarter included a special charge of $5 million for environmental remediation programs.

Excluding special items, the 1994 results reflected poor sales margins as the surge in crude oil costs during the quarter could not be recovered through higher refined products prices. In addition, an unusual amount of refinery downtime resulted in higher operating expenses and required more costly third-party product purchases to supply the company's marketing system. Operating expenses also included charges for estimated uninsured costs related to the inadvertent contamination of aviation gasoline by small quantities of jet fuel distributed in Northern California in May. Total refined product sales volumes declined 2 percent from last year's second quarter.

International refining and marketing net earnings declined to $27 million from $107 million earned in the 1993 second quarter. Earnings in the 1993 quarter included a $13 million asset sale gain.

Similar to the U.S. industry conditions, refined products prices did not keep pace with the increase in crude oil costs. Also, results included foreign exchange losses of $9 million, whereas the prior-year quarter included $14 million of foreign exchange gains. Total sales volumes declined 4 percent as lower export sales in the company's trading operations more than offset an increase in marketing sales volumes.


Chemicals earned $49 million in the 1994 second quarter compared with $141 million in the prior-year quarter, which included a $135 million gain from the sale of the Ortho lawn and garden products business. Excluding the prior-year asset sale gain, earnings improved significantly in the 1994 second quarter, particularly in the company's olefins business. As the U.S. economy improves, increased demand has resulted in stronger prices and higher sales volumes for the company's major product lines.

Corporate and Other

Corporate and other charges were $75 million in the 1994 quarter compared with charges of $48 million in the comparable period last year, which included a $33 million litigation provision.

In 1994, the company changed its method of distributing certain corporate expenses to its business segments. As a result, corporate and other charges in the 1994 second quarter include approximately $58 million that, under the previous method, would have been allocated to the various business segments. This change had no net income effect nor did it affect any segment operational trends.

Capital and Exploratory Expenditures

Capital and exploratory expenditures, including the company's share of affiliate expenditures, were $1.073 billion in the quarter, up slightly from $1.014 billion spent in the 1993 second quarter. Total expenditures for the first six months of 1994 were $2.132 billion, up 19 percent from the $1.792 billion spent in last year's first half.

Updated: July 1994