press release

Chevron Press Release - Chevron Reports Second Quarter Operating Earnings Up 15 Percent To $700 Million

SAN FRANCISCO, July 22, 1996 -- Chevron Corporation announced today second quarter operating earnings of $700 million, up 15 percent from $611 million earned in last year's second quarter.

Net special gains of $172 million, mostly due to the company's share of its Caltex affiliate's gain from the sale of refinery interests in Japan, increased second quarter net income to $872 million ($1.34 per share), from $607 million ($.93 per share) reported for the second quarter of 1995.

Net income for the first six months of 1996 was $1.488 billion ($2.28 per share), compared with $1.066 billion ($1.63 per share) reported for the 1995 first half. The 1996 six months' results benefited $172 million from special items; the 1995 comparable period results benefited $59 million from special items. Excluding special items, earnings for the 1996 first half were $1.316 billion, up 31 percent from $1.007 billion for the corresponding period of 1995.

Commenting on second quarter results, Chairman and CEO Ken Derr said, "Our worldwide upstream operations turned in excellent results, benefiting from strong crude oil and natural gas prices, and continued increases in our international crude oil production volumes. In the U.S., crude oil prices were up nearly $2 per barrel from last year's second quarter and natural gas prices were over one-third higher. Chevron's international oil production increased by 44,000 barrels per day to 688,000 barrels per day."

Derr said higher refined product margins, particularly on the West Coast, coupled with good refinery operating performance and higher sales volumes led to stronger results for the U.S. refining and marketing business. The 1996 second quarter's return on capital invested in these operations was about 11 percent on an annualized basis. Although U.S. downstream earnings improved from last year's second quarter, Derr noted that, "Over the past twelve months, our return on capital was still only a modest 3.5 percent - well below the average of other U.S. industries.

"Over the past few years, we have spent over $1 billion to upgrade and modify our two California refineries to manufacture the state-mandated cleaner burning gasolines," said Derr. "We are very pleased with the successful start-up of these facilities, which are producing the world's cleanest-burning gasolines. The environmental benefit of these new fuels in California is comparable to removing over 3 million cars from our highways.

"Higher crude oil prices and a combination of other market related forces caused gasoline prices to increase this spring. And in California, the increased manufacturing cost of cleaner-burning gasoline also has added to the pump price," said Derr. "We recognize these gasoline price increases caused concern among some of our customers; however, in recent weeks prices appear to have stabilized and even come down in some areas, as better supply and demand balance has been achieved in the market place."

Chevron's return on capital employed, excluding special items, was 10.9 percent for the twelve months ended June 30, 1996, compared with 9.8 percent for the year 1995. The return on capital for the first six months of 1996, on an annualized basis, was 12.7 percent. "I am encouraged by our excellent performance so far this year," said Derr. "Our focus on our core businesses and our cost reduction efforts have added to our profitability during this time of improved industry conditions."

Derr also reported on the status of several major projects:

  • Initial production from Chevron's N'Kossa field in Congo began in mid-June; production is expected to reach 100,000 barrels per day by year's end, of which Chevron's share is 30 percent.
  • On July 1, Chevron officially became the operator of the 1.6 billion barrel Boscan field in Venezuela. Under a fee arrangement, Chevron has assumed responsibility for all operations and increased development of this giant field.
  • Production from Tengizchevroil (TCO), Chevron's 50 percent owned affiliate in Kazakhstan, averaged slightly over 100,000 barrels of crude oil per day in the second quarter and resulted in a positive contribution to Chevron's earnings.
  • The company recently announced a $750 million project to develop its first deep water oil and gas field in the Gulf of Mexico; Chevron is the operator and holds an approximate 57 percent interest in the field. First production is expected in late 1998. Bidding aggressively at federal lease auctions over the past year, Chevron has accumulated one of the largest inventories of Gulf of Mexico deep-water exploratory leases, which should help the company remain a top participant in the gulf.
  • The merger of Chevron's natural gas marketing and natural gas liquids business with NGC Corporation is expected to close in the third quarter.
  • Chevron's chemicals operations announced plans to more than double the size of the company's Orange, Texas, plastics plant to produce 250,000 tons per year of high-density polyethylene. The expansion is expected to be complete in 1999.

Total revenues for the quarter were $11.0 billion, up 15 percent from $9.6 billion in last year's second quarter. For the six months, total revenues were $21.3 billion, also up 15 percent from $18.6 billion in the first half of 1995. Six months revenues increased on higher prices and sales volumes of crude oil, natural gas and refined products. Refined products volumes declined slightly in the quarter.

Foreign exchange losses of $6 million were included in second quarter net income, compared with foreign exchange gains of $6 million in the prior year second quarter. For the first half, foreign exchange losses in 1996 were $20 million, while in 1995 foreign exchange effects resulted in a gain of $6 million.

Exploration and Production

U.S. exploration and production net earnings of $194 million increased 29 percent from $150 million in the 1995 second quarter. The 1996 quarter results were reduced by a special charge of $9 million for environmental remediation. Second quarter earnings benefited from both higher crude oil and natural gas prices. Higher exploration expenses, mostly due to well write-offs, more than offset a decline in depreciation expenses.

Average crude oil realizations for the second quarter were $18.29 per barrel, up $1.88 from $16.41 per barrel in the 1995 second quarter; average natural gas prices increased 36 percent to $2.06 per thousand cubic feet from $1.52 in last year's second quarter.

Net liquids production declined to 342,000 barrels per day from 352,000 in the 1995 second quarter; net natural gas production declined to 1.8 billion cubic feet per day from 1.9 billion in the prior year second quarter. The production declines were mostly due to normal field declines, partially offset by new field production.

International exploration and production net earnings for the second quarter were $260 million, up 34 percent from $194 million earned in the second quarter of 1995. Earnings increased on higher crude oil prices and higher sales volumes. The 1996 results included a special charge of $7 million for an asset write-off and the 1995 results included a $3 million provision for an employee severance program.

Net liquids production increased 7 percent to 688,000 barrels per day in the current year second quarter, with nearly half of the increase coming from higher production levels from the company's TCO affiliate in Kazakhstan (where Chevron's share was up 20,000 barrels to 51,000 barrels per day). The company's operations in Australia, China and West Africa also achieved production increases. Production declines occurred in Canada and the U.K. North Sea fields. Net natural gas production increased to 578 million cubic feet per day from 556 million in the same quarter last year. Increases in Kazakhstan, Australia and Indonesia more than offset a decline in Canada.

Refining and Marketing

U.S. refining and marketing net earnings were $183 million, compared with $108 million in the 1995 second quarter. The 1996 quarter results included a special charge of $11 million for a litigation matter.

Sales margins reflected strong refining operations and higher average refined product prices. Unlike the first quarter of this year, when crude oil costs were rising more rapidly than refined product prices, tight supplies industry-wide in the second quarter allowed the recovery of higher crude oil prices and, in California, the increased manufacturing costs of mandated cleaner-burning gasoline. Total refined product sales volumes of 1.1 million barrels per day were up two percent from last year's second quarter.

International refining and marketing net earnings were $302 million, compared with $36 million in the second quarter of last year. The 1996 quarter included a net $275 million gain for the company's share of its Caltex affiliate's sale of refinery interests in Japan, less related Chevron tax effects on the distribution of proceeds to the Caltex shareholders. Also, the company's 1996 results included a special charge of $15 million for environmental remediation.

Operationally, earnings improved $6 million to $42 million. Sales margins generally remained low. Earnings in last year's second quarter were adversely affected by an extended maintenance shutdown at the company's U.K. refinery. The company's share of Caltex earnings was essentially unchanged, but the current year quarter included foreign currency losses of $8 million, compared with foreign currency gains of $6 million included in Caltex 1995 second quarter results.

Total international refined product sales volumes declined 7 percent in the second quarter to 877,000 barrels per day due to the Caltex sale on April 1 of its interest in a Japanese affiliate that owned two refineries.

Chemicals

Chemicals second quarter net earnings of $51 million declined significantly from record earnings of $175 million in the 1995 second quarter, when industry conditions were much stronger. Lower product prices and higher feedstock costs squeezed sales margins. The 1996 results also included a special charge of $16 million related to a claim settlement.

Coal and Other Minerals

Coal and other minerals net earnings increased to $11 million from $2 million in last year's second quarter, as industry conditions improved. However, results continue to reflect competition from lower-priced alternative fuel sources, particularly hydroelectric power. Results in 1995 included a $1 million special charge for an employee severance program.

Corporate and Other

Corporate and other net charges increased to $129 million from $58 million in the prior year second quarter, primarily as the result of special charges totaling $45 million in the 1996 second quarter. The charges comprised a provision for a litigation matter and an additional loss provision for the company's withdrawal from its real estate development business, including additional amounts for environmental remediation. The prior year had no special items, but benefited from favorable consolidating income tax adjustments.

Capital and Exploratory Expenditures

Capital and exploratory expenditures, including the company's share of affiliate expenditures, were $1.159 billion in the second quarter of 1996, about the same as the second quarter of 1995. Total expenditures for the first six months of 1996 were $2.082 billion, compared with $2.147 billion spent in the 1995 first half.

      
CHEVRON CORPORATION - FINANCIAL REVIEW (MILLIONS OF DOLLARS) -1- CONSOLIDATED STATEMENT OF INCOME (unaudited) Second Quarter Six Months REVENUES: 1996 1995 1996 1995 Sales and Other Operating Revenues (1) $10,514 $9,397 $20,671 $18,217 Equity in Net Income of Affiliated Companies and Other Income 483 170 662 394 10,997 9,567 21,333 18,611 COSTS AND OTHER DEDUCTIONS: Purchased Crude Oil and Products 5,498 4,616 10,946 9,134 Operating Expenses 1,514 1,346 2,827 2,711 Exploration Expenses 118 71 210 142 Selling and Administrative Expenses 386 342 740 643 Depreciation, Depletion and Amortization 524 566 1,055 1,142 Taxes Other Than on Income (1) 1,452 1,417 2,865 2,790 Interest and Debt Expense 85 104 181 214 9,577 8,462 18,824 16,776 Income Before Income Tax Expense 1,420 1,105 2,509 1,835 Income Tax Expense 548 498 1,021 769 NET INCOME $872 $607 $1,488 $1,066 PER SHARE AMOUNTS NET INCOME $1.34 $ .93 $ 2.28 $ 1.63 DIVIDENDS $ .50 $ .4625 $ 1.00 $ .925 Average Common Shares Outstanding (000's) 652,714 652,017 652,638 651,956 EARNINGS BY MAJOR OPERATING AREA (unaudited) Second Quarter Six Months 1996 1995 1996 1995 Exploration and Production United States $194 $150 $462 $300 International 260 194 511 366 Total Exploration and Production 454 344 973 666 Refining, Marketing and Transportation United States 183 108 201 6 International 302 36 377 192 Total Refining, Marketing and Transportation 485 144 578 198 Total Petroleum Operations 939 488 1,551 864 Chemicals 51 175 115 338 Coal and Other Minerals 11 2 23 14 Corporate and Other (2) (129) (58) (201) (150) NET INCOME $872 $607 $1,488 $1,066

(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.


-2-
SPECIAL ITEMS BY MAJOR OPERATING AREA             Second Quarter             Six Months
          (unaudited)                           1996        1995           1996        1995

U.S. Exploration and Production                  $(9)        $ -           $ (9)        $ -
International Exploration and Production          (7)         (3)            (7)        (10)
U. S. Refining, Marketing and Transportation     (11)          -            (11)        (10)
International Refining, Marketing and Transportation 260       -            260          80
Chemicals                                        (16)          -            (16)          -
Coal and Other Minerals                            -          (1)             -          (1)
Corporate and Other (1)                          (45)          -            (45)          -
  Total Special Items                          $ 172        $ (4)         $ 172        $ 59

SUMMARY OF SPECIAL ITEMS                          Second Quarter             Six Months
         (unaudited)                            1996        1995           1996        1995

Asset Sales                                    $ 275         $ -          $ 275         $ -
Asset Write-offs & Writedowns                    (36)          -            (36)          -
Environmental Remediation Provisions             (24)          -            (24)        (10)
Restructurings & Reorganizations                   -          (4)                       (11)
Other, Net                                       (43)          -            (43)         80
  Total Special Items                           $ 172       $ (4)         $ 172        $ 59


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


EARNINGS BY MAJOR OPERATING AREA
      EXCLUDING SPECIAL ITEMS
              (unaudited)                          Second Quarter           Six Months
                                                 1996       1995          1996         1995
Exploration and Production
 United States                                  $ 203      $ 150         $ 471        $ 300
 International                                    267        197           518          376
   Total Exploration and Production               470        347           989          676
Refining, Marketing and Transportation
 United States                                    194        108           212           16
 International                                     42         36           117          112
   Total Refining, Marketing and Transportation   236        144           329          128
   Total Petroleum Operations                     706        491         1,318          804
Chemicals                                          67        175           131          338
Coal and Other Minerals                            11          3            23           15
Corprate and Other (1)                           (84)       (58)         (156)        (150)
    Earnings Excluding Special Items              700        611         1,316        1,007

Special Items                                     172         (4)          172           59
    Net Income                                  $ 872      $ 607       $ 1,488      $ 1,066

(1) "Corporate and Other" includes interest expense, interest income on cash and marketable securities, corporate center costs, and real estate and insurance activities.


-3-
       (MILLIONS OF DOLLARS)

CONSOLIDATED BALANCE SHEET                            June 30,            December 31,
             (unaudited)                                 1996                    1995
 ASSETS:
  Cash and Cash Equivalents                           $ 1,052                   $ 621
  Other Current Assets                                  7,246                   7,246
      Total Current Assets                              8,298                   7,867
  Investments and Advances                              3,912                   4,087
  Properties, Plant and Equipment-Net                  21,772                  21,696
  Other                                                   676                     680
      TOTAL ASSETS                                   $ 34,658                $ 34,330

 LIABILITIES:
  Short-Term Debt                                     $ 3,377                 $ 3,806
  Other Current Liabilities                             5,791                   5,639
      Total Current Liabilities                         9,168                   9,445
  Long-Term Debt and Capital Lease Obligations          4,042                   4,521
  Deferred Income Taxes                                 2,676                   2,433
  Reserves For Employee Benefit Plans                   1,613                   1,584
  Deferred Credits and Other Noncurrent Obligations     1,961                   1,992
      TOTAL LIABILITIES                                19,460                  19,975
 STOCKHOLDERS' EQUITY                                  15,198                  14,355
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY     $ 34,658                $ 34,330


 CONSOLIDATED STATEMENT OF CASH FLOWS                                    Six Months
                  (unaudited)                                      1996               1995

 OPERATING ACTIVITIES
  Net Income                                                    $ 1,488            $ 1,066
  Adjustments
    Depreciation, depletion and amortization                      1,055              1,142
    Dry hole expense related to prior years' expenditures            22                  6
    Distributions more (less) than equity in affiliates' income     108               (126)
    Net before-tax losses on asset retirements and sales             46                 16
    Net currency translation losses                                   -                 34
     Net increase in operating working capital                     (161)              (432)
    Deferred income tax provision                                   242                141
    Other                                                           (33)               (76)
         Net cash provided by operating activities                2,767              1,771
 INVESTING ACTIVITIES
  Capital expenditures                                           (1,533)            (1,584)
  Proceeds from asset sales                                         339                354
  Net sales of marketable securities                                334                378
         Net cash used for investing activities                    (860)              (852)
 FINANCING ACTIVITIES
  Net payments of short-term obligations                           (501)              (261)
  Proceeds from issuance of long-term debt                           74                418
  Repayments of long-term debt and other financing obligations     (388)               (62)
  Cash dividends paid                                              (653)              (603)
  Purchases of treasury shares                                       (3)                (2)
         Net cash used for financing activities                  (1,471)              (510)

 EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS                (5)                 2

 NET CHANGE IN CASH AND CASH EQUIVALENTS                            431                411

 CASH AND CASH EQUIVALENTS AT JANUARY 1, 1996 AND 1995              621                413
 CASH AND CASH EQUIVALENTS AT JUNE 30, 1996 AND 1995            $ 1,052              $ 824

	
-4- CAPITAL AND EXPLORATORY EXPENDITURES (1) Second Quarter Six Months (millions of dollars) 1996 1995 1996 1995 United States Exploration and Production $ 335 $ 220 $ 529 $ 382 Refining, Marketing and Transportation 107 203 187 386 Chemicals 76 26 126 43 Other 32 41 46 53 Total United States 550 490 888 864 International Exploration and Production 463 442 907 901 Refining, Marketing and Transportation 141 217 279 365 Chemicals 4 11 7 16 Other 1 - 1 1 Total International 609 670 1,194 1,283 Worldwide $ 1,159 $ 1,160 $ 2,082 $ 2,147 OPERATING STATISTICS (1) NET LIQUIDS PRODUCTION (MB/D): United States 342 352 341 354 International 688 644 681 646 Worldwide 1,030 996 1,022 1,000 NET NATURAL GAS PRODUCTION (MMCF/D): United States 1,825 1,927 1,851 1,931 International 578 556 562 574 Worldwide 2,403 2,483 2,413 2,505 SALES OF NATURAL GAS (MMCF/D): United States 3,312 2,778 3,414 2,756 International 758 540 719 523 Worldwide 4,070 3,318 4,133 3,279 SALES OF NATURAL GAS LIQUIDS (MB/D): United States 190 192 215 220 International 34 49 36 48 Worldwide 224 241 251 268 SALES OF REFINED PRODUCTS (MB/D): United States 1,125 1,106 1,101 1,102 International 877 944 975 964 Worldwide 2,002 2,050 2,076 2,066 REFINERY INPUT (MB/D): United States 965 997 946 953 International 448 551 559 584 Worldwide 1,413 1,548 1,505 1,537 CHEMICALS SALES & OTHER OPERATING REVENUES (millions of dollars) (2) United States $ 854 $ 939 $ 1,571 $ 1,812 International 178 167 328 319 Worldwide $ 1,032 $ 1,106 $ 1,899 $ 2,131

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

Updated: July 1996