Chevron Press Release - Chevron Reports Fourth Quarter And Year 1995 Results
- Year 1995 operating earnings up 17 percent to $1.962 billion
- Company adopts new accounting standard for impairment of long-lived assets (FAS 121) in fourth quarter
- New accounting standard and special items totaling $869 million result in fourth quarter loss of $418 million
- Chemicals and International Upstream operations post record earnings for year
- Sixth consecutive year of increased international oil and gas production and reserves
Fourth Quarter Year ($ Millions) 1995 1994 1995 1994 Operating Earnings 451 578 1,962 1,671 New Accounting Standard (659) - (659) - Special Items (210) 45 (373) 22 Net Income (Loss) (418) 623 930 1,693
SAN FRANCISCO, Jan. 24, 1996 -- Chevron Corporation today reported that special charges and the previously announced adoption of a new accounting standard reduced reported preliminary results for the year and fourth quarter by $1.032 billion and $869 million, respectively, resulting in net income for the year 1995 of $930 million ($1.43 per share) and a net loss for the fourth quarter of $418 million ($ .64 per share loss). Comparable 1994 amounts were net income of $1.693 billion ($2.60 per share) for the year and net income of $623 million ($ .96 per share) for the fourth quarter.
Excluding the effect of the new accounting standard and special items, operating earnings increased 17 percent to $1.962 billion from $1.671 billion earned in 1994. Fourth quarter operating results were $451 million, down 22 percent from the $578 million earned in the 1994 fourth quarter.
Commenting on the year's results, Chairman and CEO Ken Derr said, "We had a very good year operationally, considering the disappointing results of our U.S. downstream operations. Both our chemicals and international upstream businesses turned in record earnings, and our U.S. upstream operations performed well despite low natural gas prices. We knew going into 1995 that U.S. downstream would be impacted by scheduled major maintenance turnarounds at all our core refineries during the year, particularly an extended turnaround of our Richmond, Calif., refinery in the fourth quarter to tie in new units required to produce the new California-mandated reformulated fuels. These planned events, along with some unplanned refinery problems and low industry refining margins, resulted in very poor results for our U.S. refining and marketing business.
"The bright side of this," continued Derr, "is that all our refineries are back on stream with no major maintenance planned for 1996 and are effectively positioned for the roll-out of the cleaner-burning gasolines mandated for California in this year's second quarter."
Derr noted, "Our chemicals business had a record year, despite softening industry conditions in the second half. Considering current conditions, we expect chemical earnings will be lower in 1996, but nonetheless continue to be strong, and we are moving forward on major expansion projects of our ethylene and paraxylene facilities -- areas where we expect continued growth.
"Our international upstream production and earnings continue to grow," said Derr. "Oil and gas production and reserves increased for the sixth consecutive year. Over this period we have more than doubled our international reserves and annual production has increased 43 percent. In 1995, combined international oil and gas production was up 4 percent and we replaced about 140 percent of production through proved reserve additions, resulting in a worldwide replacement rate of about 114 percent. We have several major development projects under way, one of which -- the N'Kossa field offshore Congo -- is scheduled for first production by mid-year. We also had some significant discoveries this past year, which together with our current projects, will ensure continued growth in this business."
Derr said, "The recently announced intent to merge Chevron's natural gas liquids and natural gas marketing businesses with NGC Corporation repositions these activities into an important growth-oriented business. We're very excited with this opportunity and, if an agreement is satisfactorily completed, we hope to have the merger completed by mid-year. When completed, Chevron will have, through common and preferred stock holdings, an approximate 28 percent economic ownership interest in NGC, North America's largest natural gas marketer, as well as largest processor and marketer of natural gas liquids.
"We're continuing to focus and concentrate our efforts in our areas of strength and have recently announced reorganizations of our U.S. marketing operations, chemicals, and international trading and lubricants businesses. All our operations and assets continue to be reviewed and cost control continues to be a top priority. Because of the high refinery maintenance costs in 1995, we didn't make as much progress in reducing costs last year as we had hoped. Nevertheless, ongoing costs, including own-use fuel costs, declined almost $300 million from 1994 and were $1.5 billion lower than in our 1991 base year. Further savings are expected this year as we realize the benefits of our reorganizations and other initiatives. We're managing our businesses on the conservative assumption of a continued low price environment," concluded Derr.
Special items and the new accounting standard had a significant effect on the 1995 fourth quarter and year results. As previously announced, in the fourth quarter, the company adopted a new accounting standard that establishes a uniform approach for recognizing and measuring impairment of long-lived assets. This change resulted in an after-tax write-down of the carrying value of the company's fixed assets, mostly U.S. oil and gas properties, of $659 million. In connection with implementing the new standard, a comprehensive review of all the company's fixed assets was conducted that, along with the write-down of certain assets made obsolete by the conversion of two West Coast refineries to produce the new California-mandated reformulated gasolines, resulted in additional after-tax adjustments of $136 million.
Apart from the accounting change, the largest special item in 1995 was the $168 million after-tax write-down in the third quarter of the company's real estate development business, which is being sold. Other net special charges totaled $69 million for the year (of which $74 million were included in fourth quarter results) and consisted of environmental remediation provisions ($90 million), reorganization and restructuring provisions ($50 million), prior year tax adjustments ($22 million), and asset sale gains and other items (net benefit of $93 million).
Total revenues in 1995 were $37.1 billion, compared with $35.8 billion in 1994. Fourth quarter revenues were $9.2 billion in both 1995 and 1994. For the year, higher crude oil and refined product prices and higher chemicals prices and sales volumes were partially offset by lower refined product sales volumes and lower natural gas prices.
Foreign currency losses included in net income were $15 million in 1995 and $64 million in 1994. For the fourth quarter, foreign currency effects were gains of $5 million in 1995 and a loss of $13 million in 1994.
Exploration and Production
U.S. exploration and production Fourth Quarter Year ($ Millions) 1995 1994 1995 1994 Operating Earnings 140 169 552 584 New Accounting Standard (490) - (490) - Special Items (9) 10 10 (66) Net (Loss) Earnings (359) 179 72 518
Higher crude oil prices in 1995 did not fully offset the effects of lower production volumes and lower natural gas prices. Natural gas accounts for about half of the company's combined U.S. oil and gas production. Ongoing operating expenses and exploration expenses both declined year to year. Normal depreciation declined, principally as a result of lower production volumes.
In the fourth quarter, crude oil and natural gas prices were higher than in the year earlier quarter. Depreciation expense declined as a result of lower production volumes and the effect of the new accounting standard adopted in the fourth quarter. However, these benefits were more than offset by the effect of lower production volumes and higher exploration expenses, due to well write-offs.
In 1995, the company's average crude oil realizations increased $1.48 per barrel to $15.34. In the fourth quarter, average crude oil realizations were $14.94 per barrel, up $.41 from the prior year quarter. Average natural gas prices for the full year 1995 fell $.26 from the 1994 average to $1.51 per thousand cubic feet; however, in the fourth quarter natural gas prices increased to their highest level of the year and, at an average of $1.69, were $.18 per thousand cubic feet higher than in the prior year fourth quarter.
Net liquids production for the year averaged 350,000 barrels per day, down from 369,000 in 1994; fourth quarter production of 343,000 barrels per day declined from 360,000 in the prior year fourth quarter. Net natural gas production in 1995 averaged about 1.9 billion cubic feet per day, compared with 2.1 billion in 1994. For the 1995 fourth quarter, natural gas production averaged 1.8 billion cubic feet per day, down from 2.0 billion in the year earlier quarter.
Natural gas prices increased in December and have remained strong into 1996, reflecting increased demand caused by abnormally cold weather in the eastern United States. The company has several projects under way, including major long-term development projects in the Gulf of Mexico, which should stabilize its U.S. oil and gas production volumes.
International exploration and production Fourth Quarter Year ($ Millions) 1995 1994 1995 1994 Operating Earnings 273 143 811 519 New Accounting Standard (81) - (81) - Special Items (8) 20 (40) 20 Net Earnings 184 163 690 539
International upstream results reflect higher crude oil sales volumes and prices. Also, fourth quarter operations include the benefit of significantly lower effective tax rates in West Africa, primarily resulting from crude oil reserve additions.
For the year 1995, net liquids production increased 4 percent to 651,000 barrels per day, and was up 5 percent to 670,000 barrels per day in the fourth quarter. New production in West Africa, China and Australia accounted for most of the increase. Net natural gas production volumes also increased, from 546 million cubic feet per day in 1994 to 565 million cubic feet per day in 1995 and from 560 million cubic feet per day in the 1994 fourth quarter to 573 million cubic feet per day in the 1995 quarter.
Further production increases are expected in 1996 with the mid-year start up of oil from the N'Kossa field offshore Congo. Other major development projects underway include the Congo Kitina field, the Britannia gas field and the expansion of the Alba oil field in the U.K. North Sea, the offshore Canada Hibernia oil field, and continued new field developments in West Africa. Also, the recently signed service agreement to operate the Boscan field in Venezuela marks a profitable new growth area for the company. In 1995, there were two major new oil field discoveries in West Africa and two natural gas discoveries offshore Australia. In 1995, the company replaced about 140 percent of its international oil and gas production through additions to proved reserves.
Refining and Marketing
U.S. refining and marketing Fourth Quarter Year ($ Millions) 1995 1994 1995 1994 Operating (Loss) Earnings (50) 135 75 325 New Accounting Standard - - - - Special Items (158) (41) (179) (285) Net (Loss) Earnings (208) 94 (104) 40
U.S. refining and marketing turned in poor results in 1995. Extensive refinery downtime coupled with weak industry refining margins resulted in a loss for the fourth quarter and significantly reduced operating earnings for the year. The company's three largest refineries underwent major maintenance turnarounds in 1995. In addition, the Richmond, Calif., refinery was down for an extended period in the fourth quarter for upgrades required to produce cleaner burning California-mandated gasolines. These turnarounds, along with some unplanned maintenance downtime, resulted in increased maintenance expense and required the higher cost purchase of refined products from third parties to supply the company's marketing system.
Average refined product prices were higher in the year and fourth quarter, reflecting the increase in crude oil feed stock costs, but industry refining margins were weak throughout much of the year as refined product availability remained ample.
Total product sales volumes declined about 15 percent to 1.1 million barrels per day for the 1995 year and fourth quarter. The volume decline was due to the sales of the company's Philadelphia refinery in August 1994 and its Port Arthur, Texas, refinery in February 1995, in connection with a major restructuring of U.S. refining and marketing operations. The volume decline occurred in unbranded bulk sales; volumes sold through the company's marketing system were about flat for the year and fourth quarter.
Special charges in the fourth quarter totaled $158 million and primarily consisted of asset write-offs and environmental remediation provisions. In connection with implementing the new accounting standard, a comprehensive review of all the company's fixed assets was undertaken that resulted in asset write-offs. Also, certain assets were made obsolete at the Richmond and El Segundo refineries in connection with the modifications required to produce California-reformulated gasolines. Environmental provisions totaled $41 million and related to operating and closed refineries as well as various former and current marketing sites.
The company has no major refinery maintenance planned for 1996 and is ready to begin selling California-reformulated gasoline, required at the pump by June 1. As previously announced, the marketing operations are being reorganized to provide better customer focus and increased efficiencies.
International refining and marketing Fourth Quarter Year ($ Millions) 1995 1994 1995 1994 Operating Earnings 103 104 283 249 New Accounting Standard - - - - Special Items (3) (10) 62 (10) Net Earnings 100 94 345 239
International refining and marketing results for the year primarily reflect improved shipping operations, partially offset by lower results in the United Kingdom refining and marketing operations, where low industry sales margins and an extensive planned refinery turnaround in the second quarter negatively affected earnings. There was also a modest improvement in earnings reported by the company's Caltex affiliate despite poor refining margins throughout its major operating areas in the Asia-Pacific region and South Africa. Caltex's foreign currency effects were a $53 million favorable swing year-to-year.
Operating earnings were flat in the fourth quarter as improved U.K. refining and marketing operations and world-wide shipping results were offset by lower Caltex earnings. Caltex results included $13 million of favorable foreign tax benefits. Caltex fourth quarter inventory valuation benefits were $15 million in 1995 and $20 million in 1994.
Refined product sales volumes averaged 969,000 barrels per day for the year and 1,055,000 barrels per day for the fourth quarter, up 4 percent and 9 percent, respectively, from the corresponding prior year periods. The increases reflect higher Caltex sales volumes and increased sales in Chevron's international trading operations.
International downstream net earnings for the year included an $86 million benefit from the company's share of a gain related to a land sale by a Caltex affiliate in Japan. This gain was partially offset by various special charges in the year and fourth quarter related to restructurings and asset write-offs.
Caltex recently announced an agreement to sell its 50 percent interest in a Japanese refining company to its partner for approximately $2 billion, which will provide proceeds for investment in higher growth areas in the Asia-Pacific region. Caltex's new grass-roots refinery in Thailand is scheduled for completion in mid-1996.
Chemicals Fourth Quarter Year ($ Millions) 1995 1994 1995 1994 Operating Earnings 38 68 524 215 New Accounting Standard (13) - (13) - Special Items (6) (5) (27) (9) Net Earnings 19 63 484 206
Chemicals reported record earnings for the year; however, industry conditions began to soften during the second half of 1995. Falling prices for the company's major products coupled with increased feedstock costs caused fourth quarter earnings to decline, compared with the 1994 fourth quarter.
Chemicals recently announced a restructuring of its businesses along geographic lines to facilitate growth of its U.S. and international operations. The company is expanding its ethylene and paraxylene facilities in the United States and has international projects under way in the Middle East and the Pacific Rim.
Coal and Other Minerals
Coal and other minerals Fourth Quarter Year ($ Millions) 1995 1994 1995 1994 Operating Earnings 22 30 47 63 New Accounting Standard (63) - (63) - Special Items (1) 48 (2) 48 Net (Loss) Earnings (42) 78 (18) 111
Coal results were lower for the year and fourth quarter due to reduced demand and lower prices. Mild winter and summer weather in the first half of the year coupled with customers electing to purchase cheaper alternative fuels resulted in lower sales volumes. Fourth quarter operating results improved from the first three quarters as industry conditions improved.
Corporate and Other
Corporate and other Fourth Quarter Year ($ Millions) 1995 1994 1995 1994 Operating Charges, net (75) (71) (330) (284) New Accounting Standard (12) - (12) - Special Items (25) 23 (197) 324 Net Charges (112) (48) (539) 40
Corporate and other net operating charges for the year increased as higher interest expense and lower earnings from real estate operations more than offset lower corporate overhead expenses. In the fourth quarter, however, these and other items were about flat with the prior year fourth quarter. Higher interest rates resulted in higher interest expense for the year, but by the fourth quarter the company's interest rates had declined to about the same level as in the prior year quarter.
Included in corporate and other charges for the year was a third quarter provision of $168 million for the expected loss on the sale of real estate development assets in connection with the company's exit from that business. Other special charges in 1995 included litigation and employee severance provisions, most of which were recognized in the fourth quarter.
Special items in 1994 consisted of favorable income tax adjustments totaling $324 million, of which $23 million were included in the fourth quarter.
Capital and Exploratory Expenditures
Capital and exploratory expenditures, including the company's share of affiliates' expenditures, were $4.800 billion for the year 1995, about level with the $4.819 billion spent in 1994. Fourth quarter expenditures were $1.508 billion and $1.645 billion in 1995 and 1994, respectively. In 1995, exploration and production spending totaled $2.714 billion, of which 68 percent was in international areas. The company recently announced its 1996 capital and exploratory budget is about $5.3 billion, a 10 percent increase from 1995 expenditures.
- FINANCIAL REVIEW
CHEVRON CORPORATION - FINANCIAL REVIEW -1- (MILLIONS OF DOLLARS) CONSOLIDATED STATEMENT OF INCOME (unaudited) Fourth Quarter Twelve Months REVENUES: 1995 1994 1995 1994 Sales and Other Operating Revenues (1) $ 8,922 $ 8,927 $ 36,310 $ 35,130 Equity in Net Income of Affiliated Companies and Other Income 235 305 772 699 9,157 9,232 37,082 35,829 COSTS AND OTHER DEDUCTIONS: Purchased Crude Oil and Products 4,463 4,430 18,033 16,990 Operating Expenses 1,608 1,321 5,974 6,358 Exploration Expenses 138 110 372 379 Selling, General and Administrative Expenses 397 339 1,384 963 Depreciation, Depletion and Amortization 1,679 598 3,381 2,431 Taxes Other Than on Income (1) 1,483 1,406 5,748 5,559 Interest and Debt Expense 94 97 401 346 9,862 8,301 35,293 33,026 Income Before Income Tax Expense (705) 931 1,789 2,803 Income Tax Expense (287) 308 859 1,110 NET INCOME $ (418) $ 623 $ 930 $ 1,693 PER SHARE AMOUNTS NET INCOME $ ( .64) $ .96 $ 1.43 $ 2.60 DIVIDENDS $ .50 $ .4625 $ 1.925 $ 1.85 Average Common Shares Outstanding (000's) 652,263 651,721 652,084 651,672 EARNINGS BY MAJOR OPERATING AREA (unaudited) Fourth Quarter Twelve Months 1995 1994 1995 1994 Exploration and Production United States $ (359) $ 179 $ 72 $ 518 International 184 163 690 539 Total Exploration and Production (175) 342 762 1,057 Refining, Marketing and Transportation United States (208) 94 (104) 40 International 100 94 345 239 Total Refining, Marketing and Transportation (108) 188 241 279 Total Petroleum Operations (283) 530 1,003 1,336 Chemicals 19 63 484 206 Coal and Other Minerals (42) 78 (18) 111 Corporate and Other (2) (112) (48) (539) 40 NET INCOME $ (418) $ 623 $ 930 $ 1,693 $ 1,286 $ 1,212 $ 4,988 $ 4,790 (1)Includes consumer excise taxes (2) "Corporate and Other" includes interest expense, interest income on cash and marketable securities, corporate center costs, and real estate and insurance activities.
CHEVRON CORPORATION - FINANCIAL REVIEW -2- (MILLIONS OF DOLLARS)SPECIAL ITEMS BY MAJOR OPERATING AREA Fourth Quarter Twelve Months (unaudited) 1995 1994 1995 1994 U.S. Exploration and Production $ (499) $ 10 $ (480) $ (66) International Exploration and Production (89) 20 (121) 20 U.S. Refining, Marketing and Transportation (158) (41) (179) (285) International Refining, Marketing and Transportation (3) (10) 62 (10) Chemicals (19) (5) (40) (9) Coal and Other Minerals (64) 48 (65) 48 Corporate and Other (1) (37) 23 (209) 324 Total Special Items $ (869) $ 45 $ (1,032) $ 22 SUMMARY OF SPECIAL ITEMS Fourth Quarter Twelve Months (unaudited) 1995 1994 1995 1994 Asset Write-offs and Revaluations Accounting Change $ (659) $ - $ (659) $ - Other (136) - (304) - Environmental Remediation Provisions (41) (11) (90) (304) Restructurings & Reorganizations(19) (45) (50) (45) Prior-Year Tax Adjustments - 43 (22) 344 Asset Dispositions 7 48 7 48 LIFO Inventory Gains (Losses) 2 (10) 2 (10) Other, Net (23) 20 84 (11) Total Special Items $ (869) $ 45 $ (1,032) $ 22 FOREIGN EXCHANGE GAINS (LOSSES) $ 5 $ (13) $ (15) $ (64) EARNINGS BY MAJOR OPERATING AREA EXCLUDING SPECIAL ITEMS (unaudited) Fourth Quarter Twelve Months 1995 1994 1995 1994 Exploration and Production United States $ 140 $ 169 $ 552 $ 584 International 273 143 811 519 Total Exploration and Production 413 312 1,363 1,103 Refining, Marketing and Transportation United States (50) 135 75 325 International 103 104 283 249 Total Refining, Marketing and Transportation 53 239 358 574 Total Petroleum Operations 466 551 1,721 1,677 Chemicals 38 68 524 215 Coal and Other Minerals 22 30 47 63 Corporate and Other (1) (75) (71) (330) (284) Earnings Excluding Special Items 451 578 1,962 1,671 Special Items (869) 45 (1,032) 22 Net Income $ (418) $ 623 $ 930 $ 1,693 (1) "Corporate and Other" includes interest expense, interest income on cash and marketable securities, corporate center costs, and real estate and insurance activities.
CHEVRON CORPORATION - FINANCIAL REVIEW -3- OPERATING STATISTICS (1) Fourth Quarter Twelve Months 1995 1994 1995 1994 NET LIQUIDS PRODUCTION (MB/D): United States 343 360 350 369 International 670 638 651 624 Worldwide 1,013 998 1,001 993 NET NATURAL GAS PRODUCTION (MMCF/D): United States 1,795 1,968 1,868 2,085 International 573 560 565 546 Worldwide 2,368 2,528 2,433 2,631 SALES OF NATURAL GAS (MMCF/D): United States 2,918 2,567 2,815 2,598 International 633 456 564 461 Worldwide 3,551 3,023 3,379 3,059 SALES OF NATURAL GAS LIQUIDS (MB/D): United States 211 247 213 215 International 38 45 47 34 Worldwide 249 292 260 249 SALES OF REFINED PRODUCTS (MB/D): United States 1,087 1,255 1,117 1,314 International 1,055 971 969 934 Worldwide 2,142 2,226 2,086 2,248 REFINERY INPUT (MB/D): United States 826 1,196 925 1,213 International 631 627 598 623 Worldwide 1,457 1,823 1,523 1,836 CHEMICALS SALES & OTHER OPERATING REVENUES (millions of dollars) (2) United States $ 698 $ 774 $ 3,332 $ 2,800 International 148 149 621 562 Worldwide $ 846 $ 923 $ 3,953 $ 3,362 (1) Includes interest in affiliates. (2) Includes sales to other Chevron companies.1994 amounts restated to conform with 1995 presentation.
Updated: January 1996