press release

Chevron Reports Second Quarter 1999 Net Income Of $350 Million

CHEVRON REPORTS SECOND QUARTER 1999 NET INCOME OF $350 MILLION; EARNINGS WERE $484 MILLION BEFORE SPECIAL ITEMS

  • Exploration and production operational earnings up strongly relative to second quarter 1998
    - Average crude oil prices rose 20 percent
    - Net international liquids production increased 4 percent to 796,000 barrels per day
  • Refining, marketing and transportation results off sharply
    - Refinery problems persist in California
    - International operations hurt by continued weakness in the Asian economies
  • Special charge of $146 million recorded for the previously announced staff reductions and other restructuring costs

SAN FRANCISCO, July 23, 1999 -- Chevron Corp. today announced second quarter 1999 net income of $350 million ($0.53 per share - diluted), a decrease of 39 percent from net income of $577 million ($0.88 per share - diluted) for the 1998 second quarter.

After adjustment for special items in both periods, earnings showed a decline of 22 percent. Earnings were $484 million ($0.73 per share - diluted) in the second quarter 1999, after excluding net charges for special items of $134 million. Special items for the quarter included a charge of $146 million for previously announced staff reductions and other restructuring costs. Earnings impacts from other special items in the quarter were largely offsetting. Adjusting for net special charges of $43 million in the 1998 second quarter, earnings were $620 million ($0.94 per share - diluted).

Net income for the first six months of 1999 was $679 million ($1.03 per share - diluted), down 37 percent from $1.084 billion ($1.65 per share - diluted) for the first half of 1998. Net income for the 1999 six-month period included net charges of $86 million for special items, while the 1998 first half included net benefits of $28 million.

Second quarter 1999 net income included foreign currency losses of $32 million, compared with gains of $96 million in the year-ago quarter. Changes between periods occurred primarily in Caltex's operations and in Chevron's Australian and Canadian businesses. For the six-month periods, foreign currency losses were $41 million in 1999, compared with gains of $50 million in the 1998 first half.

"The long-awaited recovery in crude oil prices gave our exploration and production operations a boost in the second quarter," Chairman and CEO Ken Derr said. "The average spot price for West Texas Intermediate, a benchmark crude oil, was $17.66 per barrel for the quarter -- the highest level since the fourth quarter of 1997 and 20 percent higher than last year's second quarter. Unfortunately, operational problems at our California refineries prevented us from realizing the benefits of a strengthened refined products market on the West Coast. We have estimated that these refinery upsets reduced second quarter earnings by about $100 million. Likewise, earnings from our international refining, marketing and transportation businesses declined sharply, as Caltex operations in the Far East continued to suffer from weak refined product margins."

Commenting on continued efforts to reduce costs, Derr said, "So far this year, our operating expenses, excluding special items, have averaged $5.12 per barrel, down about 6 percent from comparable operations in the 1998 first half. Operating expense reductions through the first half of this year totaled about $100 million. Excluding the costs associated with our growth components -- international exploration and production and international chemicals -- we're about $200 million below last year. This represents tremendous progress toward achieving our 1999 goal to reduce the company's cost structure by $500 million. We expect the cost savings to gain momentum in the second half of the year, as the effects of our restructurings and reorganizations take hold."

Derr noted other business highlights since the end of the first quarter, which included the following:

  • Production of natural gas and condensate began from the subsea system at the Gemini project, located in about 3,400 feet of water in the Gulf of Mexico, about 90 miles southeast of New Orleans. Chevron holds a 40 percent interest in the project, which is expected to produce at peak rates of 150-200 million cubic feet per day of natural gas and 2,000-3,000 barrels of condensate per day by the end of 1999.
  • A significant natural gas discovery was made 16 miles northwest of Fort Liard, Northwest Territories, Canada. Based on the well-test data, expected production of raw gas may reach 70-100 million cubic feet per day. Plans are being developed for the construction of production and transportation facilities and additional wells to permit first production by May 2000.
  • Total liquids production from the Tengiz Field in Kazakhstan averaged 211,000 barrels per day during the first half of 1999, up 20 percent compared with last year's first half, and reached a new monthly record of 221,000 barrels per day in June 1999.
  • Site preparation is under way at the Caspian Pipeline Consortium's (CPC) marine terminal at the Russian port of Novorossiysk. When completed in 2001, the 900-mile CPC crude oil pipeline will provide a vital crude oil transportation link from the Tengiz Field in western Kazakhstan to the Black Sea. The pipeline is a key transportation element in the goal to expand crude oil production from the Tengiz Field to 700,000 barrels per day by 2010.
  • Chevron and Sasol Ltd., a South African operator of gas-to-liquid (GTL) processing facilities, signed an agreement to create a global joint venture to utilize GTL technology that converts natural gas into synthetic crude oil for further processing into commercial products. The global joint venture will participate in the operation of the previously announced wholly owned Chevron GTL facility in Nigeria, which is expected to come on-stream in 2003.
  • Dynegy Inc., 28 percent owned by Chevron, announced an agreement to merge with Illinova Corp., an energy services holding company in Illinois. Chevron intends to invest an additional $200-$240 million to maintain a comparable percentage stake in the combined company. The merger, which will accelerate Dynegy's growth in the power generation and marketing business, is expected to be completed by the end of the first quarter 2000.

Total revenues for the quarter were $8.7 billion, an increase of 9 percent from $8.0 billion in last year's second quarter. Higher realizations for refined products and crude oil sales primarily drove the improvement. For the six-month period, total revenues were $15.4 billion, about the same as the first half of 1998.

Exploration and Production

U.S. exploration and production net income for the 1999 second quarter was $98 million, up from $85 million in the 1998 second quarter. Earnings for the 1999 quarter were $153 million after excluding special charges of $55 million for staff reductions, other restructuring costs, a regulatory issue and environmental remediation. There were no special items in the second quarter 1998.

The company's average 1999 second quarter U.S. crude oil realizations of $14.29 per barrel increased by $2.94, or 26 percent, over the second quarter 1998. Average second quarter U.S. natural gas realizations of $2.06 per thousand cubic feet were about flat with last year's quarter.

Net liquids production decreased to 312,000 barrels per day from 337,000 barrels per day in the prior-year second quarter. Natural gas production of 1.6 billion cubic feet per day declined from 1.8 billion cubic feet per day in the year-ago period. The drop-off in both oil and gas production was primarily attributable to normal field declines and property sales. New natural gas production of 18 million cubic feet per day from the Genesis and Gemini projects in the Gulf of Mexico was included in the 1999 second quarter results.

Earnings for the 1999 second quarter also benefited from lower exploration and operating expenses.

International exploration and production net income for the second quarter 1999 was $221 million, up from $211 million in the prior year's quarter. Net income for the 1999 second quarter included no net effect from special items, as charges for staff reductions and other restructuring costs were completely offset by a gain from the sale of Canadian seismic data. Earnings for the 1998 second quarter, excluding special benefits of $21 million, were $190 million. The increase in earnings reflected higher crude oil prices and increased crude oil liftings compared with the year-ago quarter.

Net international liquids production of 796,000 barrels per day for the second quarter 1999 increased 32,000 barrels per day compared with last year's quarter, primarily due to new or increased production in Angola, Kazakhstan and offshore eastern Canada. These increases were partially offset by lower net liquids production in Australia, Indonesia, Nigeria and the Republic of Congo. Lower production from these areas was partly the result of field maintenance activities and OPEC-related curtailments. Net natural gas production increased about 50 percent to 837 million cubic feet per day, reflecting production from the Britannia Field in the U.K. North Sea -- which began production in August 1998 -- and higher production in western Canada.

Net income in the 1999 second quarter included foreign currency losses of $12 million, compared with gains of $38 million in the second quarter 1998. Effects in both periods were primarily in the company's Australian and Canadian operations.

Refining, Marketing and Transportation

U.S. refining, marketing and transportation net income was $109 million, compared with $225 million in the second quarter 1998. Net special gains of $11 million were recorded in the second quarter 1999, while a special charge of $8 million was recorded in the 1998 quarter. In the 1999 quarter, a gain from the sale of the company's interest in a pipeline affiliate was partially offset by charges for environmental remediation, staff reductions and other restructuring costs.

Refined products sales realizations increased over last year's quarter, primarily reflecting stronger West Coast prices. However, due to operating problems at Chevron's California refineries, these improved market conditions did not translate into higher earnings for the company. Consequently, second quarter 1999 earnings suffered by roughly $100 million, mainly the result of substituting higher priced third-party gasoline purchases for the company's own production to meet marketplace demand. The purchase of third-party products continues into the third quarter, as Chevron's gasoline production capability at the Richmond, Calif., refinery remains restricted while repairs are under way.

Total refined product sales volumes were 1.37 million barrels per day in the second quarter 1999, up 5 percent from the comparable quarter last year. Chevron-branded motor gasoline sales improved by 4 percent over last year's quarter to 553,000 barrels per day.

International refining, marketing and transportation net income was $61 million, down from $116 million reported for the second quarter of 1998. Earnings in the 1999 quarter were $31 million after excluding net benefits from special items of $30 million. These net benefits were comprised of favorable Korean tax adjustments that were partially offset by restructuring charges attributable to both Caltex and Chevron operations. There were no special items in the second quarter 1998. Foreign currency losses in the second quarter 1999 were $21 million, compared with gains of $59 million in the 1998 quarter. Net income for the 1999 quarter also included a favorable inventory adjustment of $34 million for Caltex's operations.

The underlying decline in earnings occurred primarily in Caltex's Korean operations, where sales margins have fallen as a result of rising crude oil prices and competitive price discounting.

Total international refined products sales volumes of 911,000 barrels per day increased by nearly 15 percent in the second quarter of 1999, reflecting higher Caltex trading sales volumes.

Chemicals

Chemicals recorded a net loss of $40 million in the 1999 quarter, compared with net earnings of $47 million in last year's second quarter. Earnings for the second quarter of 1999 were $51 million after excluding special charges of $91 million for asset write-downs, environmental remediation, staff reductions and other restructuring costs. Net income for the 1998 quarter included no special charges.

Operating earnings for the quarter remained depressed because of prolonged unfavorable market conditions for commodity chemicals and additives for lubricants and fuels.

All Other

All Other incurred net charges of $99 million in the second quarter 1999, compared with net charges of $107 million in the prior-year quarter. Results for the second quarter 1999 included special charges of $29 million for staff reductions and other restructuring costs, while the second quarter 1998 included net special charges of $56 million. Excluding special items, net charges of $70 million were $19 million higher in the 1999 quarter.

Earnings from the company's coal operations for the 1999 quarter, which included a charge for the planned disposition of the company's remaining coal assets, fell by $5 million. The company's exit from the coal business will be substantially complete by the end of the third quarter 1999.

Other net charges increased by $14 million compared with last year's second quarter, reflecting higher interest expense on higher debt levels

Capital and Exploratory Expenditures

Capital and exploratory expenditures, including the company's share of affiliates' expenditures, were $1.184 billion in the 1999 second quarter, down 12 percent compared with $1.351 billion in the second quarter 1998. Expenditures for the first half of 1999 were $2.609 billion, including approximately $500 million in the first quarter for the acquisition of a 52 percent interest in Block B8/32 offshore Thailand. This represents an increase of 12 percent over expenditures of $2.323 billion in the first half of 1998.


			CHEVRON CORPORATION - FINANCIAL REVIEW
                  (Millions of Dollars Except Per-Share Amounts)

    CONSOLIDATED STATEMENT OF INCOME
    (unaudited)                        Three Months           Six Months
                                       Ended June 30,        Ended June 30,
    REVENUES:                         1999       1998      1999       1998(d)
      Sales and Other Operating
       Revenues(a)                  $8,473     $7,754     $14,872    $15,218
      Income from Equity
       Affiliates                      133        155         277        281
      Other Income                     135         60         281         98
        Total Revenues               8,741      7,969      15,430     15,597
    COSTS AND OTHER DEDUCTIONS:
      Purchased Crude Oil and
       Products                      4,286      3,549       7,067      7,184
      Operating Expenses             1,444      1,355       2,604      2,561
      Selling, General and
       Administrative Expenses         449        276         846        529
      Exploration Expenses              96        134         184        235
      Depreciation, Depletion and
       Amortization                    633        557       1,199      1,111
      Taxes Other Than on Income(a)  1,143      1,140       2,221      2,151
      Interest and Debt Expense        113         99         218        193
        Total Costs and Other
         Deductions                  8,164      7,110      14,339     13,964
      Income Before Income Tax
       Expense                         577        859       1,091      1,633
        Income Tax Expense             227        282         412        549
    NET INCOME                        $350      $ 577        $679     $1,084

    PER-SHARE AMOUNTS
      Earnings - Basic(b)             $.54       $.88       $1.04      $1.66
      Earnings - Diluted(b)           $.53       $.88       $1.03      $1.65
      Dividends                       $.61       $.61       $1.22      $1.22

    Average Common Shares
     Outstanding (000's)
          - Basic                  656,910    655,459     655,800    655,167
          - Diluted                660,033    657,762     658,770    657,503

    NET INCOME BY MAJOR
     OPERATING AREA                     Three Months            Six Months
    (unaudited)                        Ended June 30,         Ended June 30,
                                      1999       1998         1999      1998(d)
    Exploration and Production
      United States                    $98        $85        $145       $191
      International                    221        211         337        344
        Total Exploration and
         Production                    319        296         482        535
    Refining, Marketing and
     Transportation
      United States                    109        225         191        270
      International                     61        116         148        192
        Total Refining, Marketing
         and Transportation            170        341         339        462
    Chemicals                         (40)         47          10        110
    All Other(c)                      (99)      (107)       (152)       (23)
    NET INCOME                        $350      $ 577        $679     $1,084

     (a) Includes consumer excise
         taxes                       $ 986       $988      $1,898    $ 1,840
     (b) Current quarter earnings per share calculated by subtracting prior
         quarter year-to-date from year-to-date.
     (c) Includes coal operations, interest expense, interest income on cash
         and marketable securities, corporate center costs, and real estate
         and insurance activities.
     (d) Restated for accounting changes effective January 1, 1998, the net
         effect of which was immaterial.

	

			CHEVRON CORPORATION - FINANCIAL REVIEW
                              (MILLIONS OF DOLLARS)

                                        Three Months           Six Months
    SPECIAL ITEMS BY MAJOR
     OPERATING AREA                    Ended June 30,        Ended June 30,
    (unaudited)                       1999       1998        1999     1998(a)

    U. S. Exploration and
     Production                      $(55)        $--       $(52)       $ --
    International Exploration
     and Production                     --         21          --        (3)
    U. S. Refining, Marketing
     and Transportation                 11        (8)         (4)       (13)
    International Refining,
     Marketing and Transportation       30         --          30       (25)
    Chemicals                         (91)         --        (91)         --
    All Other (b)                     (29)       (56)          31         69
      Total Special Items          $ (134)      $(43)       $(86)        $28

                                        Three Months           Six Months
    SUMMARY OF SPECIAL ITEMS           Ended June 30,        Ended June 30,
     (unaudited)                      1999       1998        1999     1998(a)

    Asset Dispositions                 $92        $--        $152      $(56)
    Asset Write-offs and
     Revaluations                     (43)       (68)        (43)       (68)
    Environmental Remediation
     Provisions                       (74)        (8)        (86)       (13)
    Prior-Year Tax Adjustments          60         33          60        190
    Restructurings and
     Reorganizations                 (146)         --       (146)         --
    Other, Net                        (23)         --        (23)       (25)
      Total Special Items          $ (134)      $(43)       $(86)        $28

    FOREIGN EXCHANGE (LOSSES)
     GAINS                           $(32)        $96       $(41)        $50


    EARNINGS BY MAJOR OPERATING AREA
    EXCLUDING SPECIAL ITEMS             Three Months           Six Months
    (unaudited)                        Ended June 30,        Ended June 30,
                                      1999        1998       1999     1998(a)
    Exploration and Production
      United States                   $153        $85        $197       $191
      International                    221        190         337        347
        Total Exploration and
         Production                    374        275         534        538
    Refining, Marketing and
     Transportation
      United States                     98        233         195        283
      International                     31        116         118        217
        Total Refining, Marketing
         and Transportation            129        349         313        500
    Chemicals                           51         47         101        110
    All Other(b)                      (70)       (51)       (183)       (92)
        Earnings Excluding Special
         Items                         484        620         765      1,056

    Special Items                    (134)       (43)        (86)         28
    Net Income                        $350       $577        $679    $ 1,084

     (a) Restated for accounting changes effective January 1, 1998, the net
         effect of which was immaterial.
     (b) Includes coal operations, interest expense, interest income on cash
         and marketable securities, corporate center costs, and real estate
         and insurance activities.
	

                      CHEVRON CORPORATION - FINANCIAL REVIEW
                              (MILLIONS OF DOLLARS)

    CONSOLIDATED BALANCE SHEET                     June 30,      December 31,
                                                     1999            1998
    ASSETS:                                      (unaudited)
      Cash and Cash Equivalents                      $752            $569
      Other Current Assets                          6,405           5,728
        Total Current Assets                        7,157           6,297
      Investments and Advances                      4,916           4,604
      Properties, Plant and Equipment-Net          24,430          23,729
      Other                                         1,899           1,910
        TOTAL ASSETS                              $38,402         $36,540

    LIABILITIES:
      Short-Term Debt                              $3,801         $ 3,165
      Other Current Liabilities                     5,546           4,001
        Total Current Liabilities                   9,347           7,166
      Long-Term Debt and Capital Lease
       Obligations                                  4,319           4,393
      Noncurrent Deferred Income Taxes              4,080           3,645
      Reserves For Employee Benefit Plans           1,775           1,742
      Deferred Credits and Other Noncurrent
       Obligations                                  1,735           2,560
        TOTAL LIABILITIES                          21,256          19,506
    STOCKHOLDERS' EQUITY                           17,146          17,034
        TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                                       $38,402         $36,540

    CONSOLIDATED STATEMENT OF CASH FLOWS          Six Months   Ended June 30,
    (unaudited)                                      1999            1998

    OPERATING ACTIVITIES
    Net Income                                       $679          $1,084
    Adjustments
      Depreciation, depletion and amortization      1,199           1,111
      Dry hole expense related to prior
       years' expenditures                             24              33
      Distributions less than equity in
       affiliates' income                            (164)           (152)
      Net before-tax (gains) losses on asset
       retirements and sales                         (250)            105
      Net currency translation losses (gains)          28             (23)
      Net decrease (increase) in operating
       working capital                              1,254            (826)
      Deferred income tax provision                   (58)            231
      Other                                          (722)           (101)
        Net cash provided by operating
         activities                                 1,990           1,462
    INVESTING ACTIVITIES
      Capital expenditures                         (1,641)         (1,705)
      Proceeds from asset sales                       361              94
      Other investing cash flows, net                  54           (126)
      Net (purchases) sales of marketable
       securities                                    (121)            130
        Net cash used for investing activities     (1,347)         (1,607)
    FINANCING ACTIVITIES
      Net borrowings of short-term obligations        631           1,421
      Proceeds from issuance of long-term debt         48             118
      Repayments of long-term debt and other
       financing obligations                         (433)           (284)
      Cash dividends paid                            (800)           (798)
      Net Sales (Purchases) of treasury shares         95            (139)
        Net cash used for financing activities       (459)            318

    EFFECT OF EXCHANGE RATE ON CASH AND
     CASH EQUIVALENTS                                 (1)             (3)

    NET CHANGE IN CASH AND CASH EQUIVALENTS           183             170

    CASH AND CASH EQUIVALENTS AT JANUARY 1,
     1999 AND 1998                                    569           1,015
    CASH AND CASH EQUIVALENTS AT JUNE 30,
     1999 AND 1998                                   $752          $1,185


	

                    CHEVRON CORPORATION - FINANCIAL REVIEW
                              (MILLIONS OF DOLLARS)

                                          Three Months         Six Months
    CAPITAL AND EXPLORATORY
     EXPENDITURES(A)                     Ended June 30,      Ended June 30,
    (millions of dollars)                1999      1998      1999      1998
    United States
      Exploration and Production         $321      $374      $574      $648
      Refining, Marketing and
       Transportation                      97       156       210       256
      Chemicals                            72        94       173       136
      Other                                17        82        37       118
        Total United States               507       706       994     1,158

    International
      Exploration and Production          558       468     1,418       890
      Refining, Marketing and
       Transportation                      89        80       142       152
      Chemicals                            30        85        55       107
      Other                                --        12        --        16
        Total International               677       645     1,615     1,165
        Worldwide                      $1,184    $1,351    $2,609    $2,323

    OPERATING STATISTICS (A)
    NET LIQUIDS PRODUCTION (MB/D):
      United States                       312       337       309       336
      International                       796       764       803       756
        Worldwide                       1,108     1,101     1,112     1,092

    NET NATURAL GAS PRODUCTION (MMCF/D):
      United States                     1,638     1,786     1,657     1,796
      International                       837       559       835       602
        Worldwide                       2,475     2,345     2,492     2,398

    SALES OF NATURAL GAS (MMCF/D):
      United States                     3,265     3,336     3,312     3,416
      International                     1,679     1,398     1,793     1,363
        Worldwide                       4,944     4,734     5,105     4,779

    SALES OF NATURAL GAS LIQUIDS (MB/D):
      United States                       109       127       128       134
      International                        51        60        51        58
        Worldwide                         160       187       179       192

    SALES OF REFINED PRODUCTS (MB/D):
      United States                     1,368     1,307     1,278     1,220
      International                       911       791       900       800
        Worldwide                       2,279     2,098     2,178     2,020

    REFINERY INPUT (MB/D):
      United States                       969       996       946       877
      International                       475       478       485       485
        Worldwide                       1,444     1,474     1,431     1,362

    CHEMICALS SALES & OTHER OPERATING
    REVENUES (millions of dollars) (B)
      United States                      $720      $659    $1,347    $1,340
      International                       191       140       368       285
        Worldwide                        $911      $799    $1,715    $1,625

    (A) Includes interest in affiliates
    (B) Includes sales to other Chevron companies.

	

Updated: July 1999