press release

Chevron Press Release - Chevron Reports Second Quarter Net Income Of $823 Million

  • Record operating earnings achieved for second consecutive quarter
  • Worldwide production increased 50,000 oil equivalent barrels per day from the 1996 second quarter to 1.481 million barrels
  • Operating expense per barrel declined 86 cents to $5.42 from the year-ago quarter
  • Return on capital employed, excluding special items, was 14.0 percent for the 12 months ended June 30, 1997, up from 12.8 percent for the year 1996

SAN FRANCISCO, July 23, 1997 -- Continuing its record setting pace, Chevron Corp. announced today that second quarter operating earnings of $837 million were 20 percent higher than 1996 second quarter operating earnings of $700 million and were the highest in the company's history, breaking the record set in the first quarter of this year.

Net income for the quarter was $823 million, ($1.26 per share), as asset sale gains and other net special items totaling $52 million were more than offset by a $66 million charge arising from the company's broad-based performance stock option program. The options became exercisable in June for each Chevron employee after Chevron's stock price closed over $75 a share for three consecutive days, the triggering event under the program. Net income in the 1996 second quarter of $872 million ($1.34 per share) benefited $172 million from net special gains, mostly related to the company's share of its Caltex affiliate's gain from the sale of refinery interests in Japan.

Net income for the first six months of 1997 was $1.654 billion ($2.53 per share), up 11 percent from $1.488 billion ($2.28 per share) reported for the 1996 first half. The 1997 results benefited $13 million from special items while 1996 results benefited $172 million from special items. Excluding special items, earnings for the 1997 first half were $1.641 billion, 25 percent higher than the $1.316 billion earned in the 1996 corresponding period.

Commenting on second quarter results, Chairman and CEO Ken Derr said, "We had another excellent quarter. All our business units turned in strong performances, both financially and operationally. Despite lower crude oil prices, our worldwide upstream earnings increased on higher production volumes and lower income tax expense in certain countries internationally. Downstream operating results surpassed last year's strong second quarter, benefiting from the lower crude oil prices, lower operating expenses and higher sales volumes. Chemicals earnings improved on lower feedstock costs and stronger prices for some of the company's major products."

Derr continued, "Chevron's return on capital employed, excluding special items, was 14.0 percent for the 12 months ended June 30, 1997, compared with 12.8 percent for the year 1996. The company's ongoing operating expense per barrel declined 86 cents to $5.42 from last year's second quarter, reflecting both lower total expenses and higher production and sales volumes. International liquids production increased 46,000 barrels per day to 734,000 barrels, a 7 percent increase from the 1996 second quarter.

"We were delighted that our employee stock option program vested in June," said Derr. "The nearly 50 percent increase in our stock price in the 18 months since the options were granted is a tribute to the contributions of our employees worldwide and to Chevron's financial and operational strength. Reflecting confidence in our future performance, the Board of Directors in April increased the company's quarterly dividend 7 percent to 58 cents per share, setting the stage for the tenth consecutive year of annual dividend increases.

"We continue to emphasize profitable growth, and in this regard, several significant events occurred in the second quarter," said Derr. He noted that in the upstream side of the business, for example, the company:

  • Completed the sale of a 5 percent interest in the Tengiz oil field to LUKARCO, a joint venture of Arco and Russia's LUKoil. Chevron's second quarter results included a $32 million gain from this sale. Also, Chevron officially acquired a 15 percent ownership interest in the restructured Caspian Pipeline Consortium. Last week, the company announced the construction of a fifth oil and gas processing plant at Tengiz, to be commissioned by the end of 1999. This expansion project will boost production capacity to 240,000 barrels per day. All of these developments bring the company closer to realizing the Tengiz field's vast potential. Tengiz's second quarter oil production averaged 166,000 barrels per day.
  • Began first production of crude oil from Area C, offshore Angola. Previous production has been from Areas A and B of the concession. Also, the company announced a significant crude oil discovery in Block 14, a contract area adjacent to the concession, and its first find in that country's emerging deep-water area. Chevron is operator and holds a 31 percent interest in the Block 14 Consortium.
  • Was the successful bidder, with its partners, to operate the LL-652 oil field in Venezuela's Lake Maracaibo, under a 20-year operating contract. Chevron will be the operator with a 30 percent interest. The field is currently producing 12,000 barrels per day, but the partners believe it has the potential to produce 100,000 barrels per day.
  • Signed a production-sharing contract with China National Petroleum Corp. to explore for oil in the Shengli Field Complex, China's second largest oil field, located about 200 miles southeast of Beijing. It is the company's first onshore China oil venture.
  • Successfully towed-out the huge Hibernia production platform and positioned it in the oil field, located about 200 miles southeast of St. John's, Newfoundland. Drilling is scheduled to begin in August, with first production expected in December.

In the chemicals area, the company announced in June a joint venture agreement with the Petroleum Authority of Thailand to proceed with engineering for a world-scale aromatics facility in Map Ta Phut, Thailand. The $1.4 billion plant, scheduled to begin production in 2000, will have annual production of 675,000 tons of paraxylene and 600,000 tons of benzene. Also, in May, Chevron signed a memorandum of understanding with Maraven, a subsidiary of Petroleos de Venezuela, S.A., to conduct a feasibility study for the development of an integrated aromatics project in Venezuela.

Total revenues for the second quarter were $10.3 billion, down from $11.0 billion in the 1996 second quarter, when crude oil and refined product prices were higher. For the six months, total revenues were $21.4 billion, about flat with the 1996 first half.

Foreign exchange gains of $23 million were included in second quarter net income, compared with foreign exchange losses of $6 million in the prior year second quarter. For the first half of 1997, foreign exchange gains were $5 million, while in 1996 foreign exchange effects resulted in a loss of $20 million.

Exploration and Production

U.S. exploration and production net earnings of $182 million declined slightly from $194 million in the 1996 second quarter. The 1997 quarter results were reduced by a special charge of $11 million for the performance stock option program and the prior year quarter included a charge of $9 million for environmental remediation.

Average crude oil realizations for the second quarter of $16.86 per barrel were $1.43 lower than in last year's second quarter; average natural gas prices declined 11 cents per thousand cubic feet to $1.95. The effect of the lower oil and gas prices was mitigated by lower operating and exploration expenses.

Total U.S. production increased in the second quarter with net liquids production of 340,000 barrels per day about flat with the prior year quarter's 342,000 barrels per day and net natural gas production increasing to 1.90 billion cubic feet per day from 1.83 billion.

International exploration and production net earnings for the second quarter were $357 million, up 37 percent from $260 million earned in the second quarter of 1996. The 1997 quarter benefited a net $59 million from special items as asset sales and a favorable prior-year tax adjustment were offset by a $5 million charge for the company's performance stock option program. In the 1996 quarter, results included a $7 million asset write-off. Excluding special items, 1997 second quarter earnings of $298 million increased 12 percent from the year-ago quarter results of $267 million.

Net liquids production increased 7 percent to 734,000 barrels per day, with most of the increase coming from the Republic of Congo and the company's TCO affiliate in Kazakhstan. Smaller increases elsewhere in West Africa and Indonesia were offset by production declines in the U. K. North Sea and Papua New Guinea. Net natural gas production declined to 543 million from 578 million cubic feet per day, principally due to lower production in Australia.

Despite lower crude oil prices, earnings increased on the higher liquids production volumes and lower effective income tax rates arising from the utilization of tax-loss carryforwards in certain countries. Also, foreign currency effects increased earnings $12 million in the 1997 quarter, compared with zero in the 1996 second quarter.

Refining and Marketing

U.S. refining and marketing net earnings were $182 million, about flat with the $183 million reported in the second quarter of last year. Earnings in both periods were reduced by special charges. The 1997 quarter included charges of $23 million for the performance stock option program and $12 million for environmental remediation provisions. The 1996 quarter results were reduced $11 million by special items. Excluding special charges, 1997 results of $217 million increased 12 percent from 1996 earnings of $194 million.

Earnings improved on lower crude oil feedstock costs, lower operating expenses and higher sales volumes. Refined product sales volumes were up almost 6 percent to 1.19 million barrels per day.

International refining and marketing net earnings were $92 million compared with $302 million reported in last year's second quarter, which benefited $260 million from special items, almost all related to the company's share of its Caltex affiliate's sale of refinery interests in Japan. The 1997 quarter results were reduced $3 million by a special charge for the performance stock option program. Excluding special items, 1997 operating earnings of $95 million were more than double the 1996 second quarter earnings of $42 million.

Operating conditions generally improved in the United Kingdom and in the Caltex Asia-Pacific areas, resulting in higher sales margins. Also, there was a $24 million favorable swing in foreign currency effects, almost all Caltex related. Foreign currency gains were $13 million in the 1997 quarter compared with losses of $11 million in the 1996 second quarter. Refined product sales volumes were about flat with the year-ago quarter, as a 7 percent increase in Caltex sales was offset by lower volumes in the company's trading activities.

Chemicals

Chemicals second quarter net earnings of $77 million increased from $51 million in the prior-year second quarter. The 1997 results were reduced $9 million by a special charge for the performance stock option program; 1996 results were reduced $16 million by a special charge related to a claim settlement. Excluding the special charges, 1997 earnings of $86 million increased 28 percent from the 1996 second quarter results of $67 million. Earnings improved on lower feedstock costs and price improvements for some of the company's major products.

Corporate and Other

Corporate and other net charges declined to $73 million from $129 million in the 1996 second quarter, which included $45 million of special charges. The 1997 second quarter results included a special charge of $13 million for the performance stock option program. Ongoing net charges were lower due to a number of factors, including lower interest expense, higher interest income, lower insurance expense and pension settlement gains.

Capital and Exploratory Expenditures

Capital and exploratory expenditures, including the company's share of affiliate expenditures, were $1.304 billion in the second quarter of 1997, compared with $1.159 billion in the second quarter of 1996. Total expenditures for the first six months of 1997 were $2.245 billion, compared with $2.082 billion spent in the 1996 first half.

CHEVRON CORPORATION - FINANCIAL REVIEW
CONSOLIDATED STATEMENT OF INCOME
(unaudited)

Second Quarter

Six Months

REVENUES: 1997

1996

1997

1996

Sales and Other Operating Revenues (1) $9,947 $10,514 $20,741 $20,671
Equity in Net Income of Affiliated Companies 193 446 371 582
Other Income 134

37

255

80


10,274

10,997

21,367

21,333

COSTS AND OTHER DEDUCTIONS:
Purchased Crude Oil and Products 4,887 5,498 10,597 10,946
Operating Expenses 1,247 1,514 2,622 2,827
Selling and Administrative Expenses 391 386 736 740
Exploration Expenses 98 118 179 210
Depreciation, Depletion and Amortization 549 524 1,095 1,055
Taxes Other Than on Income (1) 1,630 1,452 3,125 2,865
Interest and Debt Expense 76

85

158

181


8,878

9,577

18,512

18,824

Income Before Income Tax Expense 1,396 1,420 2,855 2,509
Income Tax Expense 573

548

1,201

1,021

NET INCOME $ 823

$ 872

$1,654

$1,488

PER SHARE AMOUNTS
NET INCOME $1.26 $1.34 $2.53 $2.28
DIVIDENDS $ .58 $ .50 $1.12 $1.00
Average Common Shares Outstanding (000's) 653,649 652,714 653,487 652,638
EARNINGS BY MAJOR OPERATING AREA
(unaudited)

Second Quarter

Six Months


1997

1996

1997

1996

Exploration and Production
United States $ 182 $ 194 $ 543 $ 462
International 357

260

704

511

Total Exploration and Production 539

454

1,247

973

Refining, Marketing and Transportation
United States 182 183 252 201
International 92

302

148

377

Total Refining, Marketing and Transportation 274

485

400

578

Total Petroleum Operations 813 939 1,647 1,551
Chemicals 77 51 140 115
Coal and Other Minerals 6 11 21 23
Corporate and Other (2) (73)

(129)

(154)

(201)

NET INCOME $ 823

$ 872

$1,654

$1,488


(1) Includes consumer excise taxes $1,447 $1,277 $2,761 $2,521
(2) "Corporate and Other" includes interest expense, interest income on cash and marketable securities, corporate center costs, and real estate and insurance activities.

SPECIAL ITEMS BY MAJOR OPERATING AREA
(unaudited)

Second Quarter

Six Months


1997

1996

1997

1996

U. S. Exploration and Production $ (11) $ (9) $ 32 $ (9)
International Exploration and Production 59 (7) 59 (7)
U. S. Refining, Marketing and Transportation (35) (11) (43) (11)
International Refining, Marketing and Transportation (3) 260 (3) 260
Chemicals (9) (16) (9) (16)
Coal and Other Minerals (2) - (2) -
Corporate and Other * (13)

(45)

(21)

(45)

Total Special Items $ (14)

$172

$ 13

$172


SUMMARY OF SPECIAL ITEMS
(unaudited)

Second Quarter

Six Months


1997

1996

1997

1996

Asset Sales $ 50 $275 $ 99 $275
Asset Write-offs & Writedowns - (36) - (36)
Environmental Remediation Provisions (12) (24) (26) (24)
Prior-Year Tax Adjustments 14 - 14 -
Other, Net (66)

(43)

(74)

(43)

Total Special Items $ (14)

$172

$ 13

$172


FOREIGN EXCHANGE GAINS (LOSSES) $ 23 $ (6) $ 5 $ (20)

EARNINGS BY MAJOR OPERATING AREA
EXCLUDING SPECIAL ITEMS

(unaudited)

Second Quarter

Six Months


1997

1996

1997

1996

Exploration and Production
United States $ 193 $ 203 $ 511 $ 471
International 298

267

645

518

Total Exploration and Production 491

470

1,156

989

Refining, Marketing and Transportation
United States 217 194 295 212
International 95

42

151

117

Total Refining, Marketing and Transportation 312

236

446

329

Total Petroleum Operations 803 706 1,602 1,318
Chemicals 86 67 149 131
Coal and Other Minerals 8 11 23 23
Corporate and Other * (60)

(84)

(133)

(156)

Earnings Excluding Special Items 837 700 1,641 1,316

Special Items (14)

172

13

172

Net Income $ 823

$ 872

$1,654

$1,488


* "Corporate and Other" includes interest expense, interest income on cash and marketable securities, corporate center costs, and real estate and insurance activities.
CONSOLIDATED BALANCE SHEET
(unaudited)

June 30,
1997

December 31,
1996

ASSETS:
Cash and Cash Equivalents $1,280 $ 892
Other Current Assets 6,145

7,050

Total Current Assets 7,425 7,942
Investments and Advances 4,379 4,463
Properties, Plant and Equipment-Net 22,045 21,496
Other 1,108

953

TOTAL ASSETS $34,957

$34,854

LIABILITIES:
Short-Term Debt $2,888 $2,706
Other Current Liabilities 5,382

6,201

Total Current Liabilities 8,270 8,907
Long-Term Debt and Capital Lease Obligations 3,553 3,988
Deferred Income Taxes 3,018 2,851
Reserves For Employee Benefit Plans 1,627 1,627
Deferred Credits and Other Noncurrent Obligations 1,943

1,858

TOTAL LIABILITIES 18,411 19,231
STOCKHOLDERS' EQUITY 16,546

15,623

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $34,957

$34,854



CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)

Six Months


1997

1996

OPERATING ACTIVITIES
Net Income $1,654 $1,488
Adjustments
Depreciation, depletion and amortization 1,095 1,055
Dry hole expense related to prior years' expenditures 18 22
Distributions (less) more than equity in affiliates' income (199) 108
Net before-tax (gains) losses on asset retirements and sales (187) 46
Net currency translation gains (15) -
Net increase in operating working capital (203) (161)
Deferred income tax provision 190 242
Other 20

(33)

Net cash provided by operating activities 2,373

2,767

INVESTING ACTIVITIES
Capital expenditures (1,660) (1,533)
Proceeds from asset sales 298 339
Net sales of marketable securities 306

334

Net cash used for investing activities (1,056)

(860)

FINANCING ACTIVITIES
Net borrowings (payments) of short-term obligations 8 (501)
Proceeds from issuance of long-term debt 8 74
Repayments of long-term debt and other financing obligations (202) (388)
Cash dividends paid (732) (653)
Purchases of treasury shares (4)

(3)

Net cash used for financing activities (922)

(1,471)


EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS (7)

(5)


NET CHANGE IN CASH AND CASH EQUIVALENTS 388 431
CASH AND CASH EQUIVALENTS AT JANUARY 1, 1997 AND 1996 892

621

CASH AND CASH EQUIVALENTS AT JUNE 30, 1997 AND 1996 $1,280

$1,052




CAPITAL AND EXPLORATORY EXPENDITURES (1)
(millions of dollars)

Second Quarter

Six Months


1997

1996

1997

1996

United States
Exploration and Production $ 392 $ 335 $ 690 $ 529
Refining, Marketing and Transportation 89 107 152 187
Chemicals 135 76 227 126
Other 23

32

53

46

Total United States 639

550

1,122

888


International
Exploration and Production 447 463 786 907
Refining, Marketing and Transportation 178 141 269 279
Chemicals 33 4 58 7
Other 7

1

10

1

Total International 665

609

1,123

1,194

Worldwide $1,304

$1,159

$2,245

$2,082


OPERATING STATISTICS (1)
NET LIQUIDS PRODUCTION (MB/D):
United States 340 342 344 341
International 734

688

731

681

Worldwide 1,074

1,030

1,075

1,022


NET NATURAL GAS PRODUCTION (MMCF/D):
United States 1,896 1,825 1,911 1,851
International 543

578

580

562

Worldwide 2,439

2,403

2,491

2,413


SALES OF NATURAL GAS (MMCF/D):
United States 3,776 3,312 3,773 3,414
International 741

758

759

719

Worldwide 4,517

4,070

4,532

4,133


SALES OF NATURAL GAS LIQUIDS (MB/D):
United States 100 190 128 215
International 41

34

41

36

Worldwide 141

224

169

251


SALES OF REFINED PRODUCTS (MB/D):
United States 1,192 1,125 1,181 1,101
International 882

877

897

975

Worldwide 2,074

2,002

2,078

2,076


REFINERY INPUT (MB/D):
United States 979 965 913 946
International 588

448

581

559

Worldwide 1,567

1,413

1,494

1,505


CHEMICALS SALES & OTHER OPERATING
REVENUES
(millions of dollars) (2)
United States $ 798 $ 854 $1,550 $1,571
International 151

178

285

328

Worldwide $ 949
$1,032
$1,835
$1,899

(1) Includes interest in affiliates.
(2) Includes sales to other Chevron companies.

Updated: July 1997