press release

Chevron Press Release - Chevron Reports Third Quarter Net Income Of $727 Million

  • Strong operating earnings continued at a record setting pace for the year
  • Operating expense per barrel declined 41 cents from the year-ago quarter to $5.49
  • Return on capital employed, excluding special items, was 14.1 percent for the twelve months ended September 30, 1997, up from 12.5 percent for the year 1996

SAN FRANCISCO, Oct. 22, 1997 - Chevron reported net income of $727 million ($1.11 per share) for the third quarter 1997, an increase of 11 percent from the $655 million ($1.00 per share) reported for the third quarter of 1996. Net income in the 1997 third quarter was reduced by $5 million of net special items, including an additional charge of $72 million for the disposition of the company's refining and marketing assets in the United Kingdom, and charges for environmental remediation provisions and the write-off of certain telecommunications equipment. These charges were nearly offset by $84 million of favorable prior-year income tax adjustments. For the third quarter 1996, net income included a net benefit of $5 million from special items. Excluding special items, earnings in the third quarter were $732 million, an increase of 13 percent from the $650 million earned in the 1996 third quarter.

Net income for the first nine months of 1997 was $2.381 billion ($3.64 per share), up 11 percent from $2.143 billion ($3.28 per share) reported for the first nine months of 1996. The 1997 results included net gains of $8 million from special items while 1996 results benefited $177 million from special items, mostly related to the company's Caltex affiliate's sale of refinery interests in Japan. Excluding special items, earnings for the 1997 nine months were $2.373 billion, 21 percent higher than the $1.966 billion earned in the corresponding 1996 period.

Commenting on third quarter results, Chairman and CEO Ken Derr said, "We had another excellent quarter that continues our trend of solid operating results. Our improvement from last year's quarter was led by U.S. refining, marketing and transportation operations. Although down from this year's second quarter, third quarter 1997 downstream operating results surpassed last year's third quarter by more than 80 percent, as our refining and marketing business continues to benefit from favorable market conditions, lower operating expenses and higher sales volumes. Worldwide exploration and production operating earnings, although strong, declined from the 1996 third quarter as higher natural gas prices could not fully offset the more than $2.00 per barrel decline in crude oil prices. Chemicals earnings also declined as industry conditions weakened, resulting in lower prices for some of the company's major products. Operating expenses at some chemical plants increased due to higher maintenance and expansion activity this quarter.

"We continue to exceed our objective of a 12 percent return on capital employed," continued Derr. "For the 12 months ended September 30, 1997, our return on capital employed, excluding special items, was 14.1 percent, compared with 12.5 percent for the year 1996. The company's ongoing operating expense per barrel declined 41 cents from last year's third quarter to $5.49, reflecting both lower total expenses and higher volumes."

Recently, the company announced several noteworthy developments:

  • An agreement was signed with the Republic of Azerbaijan to explore the deep-water Absheron Offshore Block in the southern Caspian Sea. Chevron will have a 30 percent interest and will be the operator of this venture, which is expected to begin exploratory drilling in late 1999.
  • The first liquefied petroleum gas (LPG) exports from the company's Escravos, Nigeria, joint venture gas project occurred in September. This project provides a commercial outlet for LPG and produced gas.
  • The company and its partners were the successful bidders for 64 deep-water blocks offshore Texas in the Gulf of Mexico. Chevron now has more than 350 leases in the Gulf's deep water.
  • The CACT Operators Group, in which Chevron has a 16 percent interest, discovered crude oil in the Pearl River Mouth Basin of the South China Sea. CACT, one of China's largest offshore producers, currently produces 100,000 barrels per day. The new discovery can be produced using the existing infrastructure.
  • Tengizchevroil, in which Chevron has a 45 percent interest, signed an agreement with Sinochem, a Chinese state oil trader, to make a test shipment of crude oil from the Tengiz field in Kazakhstan to China by rail later this year. This test shipment will help evaluate the feasibility of transporting crude oil via rail while awaiting the development of alternate means of transportation to China.

Total revenues for the third quarter were $10.3 billion, down from $11.0 billion in the 1996 third quarter, as realizations for refined products and crude oil declined from last year. For the nine months, total revenues were $31.7 billion, compared with $32.4 billion for the first nine months of 1996.

Foreign exchange gains of $36 million were included in third quarter 1997 net income, compared with gains of $6 million in the prior year third quarter. For the first nine months of 1997, foreign exchange gains were $41 million, while in 1996 foreign exchange losses totaled $14 million.

Exploration and Production

U.S. exploration and production earnings of $193 million declined 19 percent from $237 million in last year's third quarter. There were no special items in the 1997 quarter; however, the 1996 quarter included a net gain of $17 million from the merger of Chevron's natural gas marketing and natural gas liquids businesses with NGC Corporation and the unrelated sale of a producing property. Excluding these special items, earnings of $193 million for the third quarter 1997 declined 12 percent compared with $220 million in last year's third quarter reflecting a decline in crude oil realizations. Partially offsetting the lower crude oil realizations were higher average natural gas prices and lower operating expenses.

Crude oil realizations averaged $16.74 per barrel for the third quarter of 1997, 11 percent lower than the $18.88 per barrel averaged in last year's third quarter. Average natural gas prices increased 14 cents per thousand cubic feet to $2.20.

U.S. net liquids production increased in the third quarter to 343,000 barrels per day compared with the prior year quarter's 340,000 barrels per day; net natural gas production decreased to 1.80 billion cubic feet per day from 1.86 billion in the 1996 quarter.

International exploration and production earnings for the third quarter were $287 million, down slightly from $291 million earned in the third quarter of 1996.

Despite lower crude oil prices, earnings were comparable to the prior year's quarter due to lower operating and exploration expenses and a lower effective income tax rate. Also, foreign currency effects increased earnings $17 million in the 1997 quarter, compared with an increase of $5 million in the 1996 third quarter.

Net liquids production increased to 719,000 barrels per day in the third quarter 1997 from 712,000 barrels per day in last year's quarter, but was down from the second quarter 1997, in part reflecting lower production from Kazakhstan due to scheduled third quarter maintenance at the Tengiz facilities. In the third quarter 1997 net natural gas production declined to 580 million from 587 million cubic feet per day in the comparable quarter last year.

Refining and Marketing

U.S. refining and marketing earnings were $193 million compared with $80 million reported in the third quarter of last year. Earnings for the 1997 third quarter did not include any special items, while the 1996 quarter included net charges of $26 million, mainly for environmental remediation provisions. Excluding special items, earnings for the 1997 quarter increased by 82 percent from $106 million in the third quarter 1996.

Despite a decline in sales realizations, operating earnings increased as refined product sales volumes increased and crude oil feedstock costs and operating expenses declined. Refined product sales volumes were up more than 7 percent to 1.244 million barrels per day in the third quarter 1997.

International refining and marketing earnings were $11 million compared with $21 million reported in last year's third quarter. The 1997 quarter results were reduced $72 million by an additional charge associated with the expected fourth quarter 1997 disposition of certain U.K. marketing and refining assets and the subsequent planned closure of the company's refinery in Milford Haven, Wales. Excluding special items, 1997 operating earnings of $83 million were nearly four times the 1996 third quarter earnings of $21 million.

Caltex operations benefited from improved market conditions, particularly in Korea, although margins were adversely affected by currency devaluations in Thailand, Malaysia and the Philippines. However, favorable balance sheet currency translation adjustments caused by the devaluations more than offset the related product margin declines. While Caltex refined product sales volumes were flat compared to last year, total sales volumes for international refining and marketing operations declined by 4 percent to 863,000 barrels per day in the 1997 third quarter, primarily due to lower sales volumes from the company's trading activities.

Foreign currency gains totaled $19 million in the 1997 third quarter compared with a loss of $1 million in the 1996 quarter.

Chemicals

Chemicals third quarter earnings of $25 million declined from $49 million in the prior-year third quarter. The 1997 results were reduced $9 million by a special charge for environmental remediation provisions; 1996 results were reduced by $12 million for asset write-offs. Excluding the special charges, 1997 earnings of $34 million decreased 44 percent from the 1996 third quarter results of $61 million. The decline in operating earnings resulted from lower sales margins and higher expenses from maintenance and expansion activities. The 1996 third quarter also included the receipt of $17 million after-tax of insurance proceeds.

Coal and Other Minerals

Coal and other minerals earnings increased to $16 million in the third quarter 1997 from $12 million for the same quarter last year, which included a special charge of $3 million for an employee severance program.

Corporate and Other

Corporate and other earned a net $2 million in the third quarter 1997 compared with a net charge of $35 million in the 1996 third quarter. The 1997 results included a special net gain of $76 million for prior-year income tax adjustments offset partially by a charge for the write-off of certain telecommunications equipment. The 1996 quarter included a net gain of $29 million from a favorable prior-year income tax adjustment, partially offset by special charges for employee severance and a litigation matter. Excluding special items, net charges from corporate activities increased by $10 million to $74 million in the third quarter 1997. The increase for the 1997 quarter was primarily due to lower pension settlement gains than in last year's quarter.

Capital and Exploratory Expenditures

Capital and exploratory expenditures, including the company's share of affiliate expenditures, were $1.556 billion in the third quarter of 1997, compared with $1.167 billion in the third quarter of 1996. Total expenditures for the first nine months of 1997 were $3.801 billion, compared with $3.249 billion spent in the comparable 1996 period.

CHEVRON CORPORATION - FINANCIAL REVIEW
(MILLIONS OF DOLLARS)

CONSOLIDATED STATEMENT OF INCOME
(unaudited)
Third Quarter Nine Months
REVENUES: 1997 1996 1997 1996
Sales and Other Operating Revenues 1 $10,130 $10,846 $30,871 $ 31,517
Income from Equity Affiliates 164 104 535 686
Other Income 34 99 289 179
10,328 11,049 31,695 32,382
COSTS AND OTHER DEDUCTIONS:
Purchased Crude Oil and Products 5,027 5,771 15,624 16,717
Operating Expenses 1,355 1,461 3,977 4,288
Selling and Administrative Expenses 301 303 1,037 1,043
Exploration Expenses 109 119 288 329
Depreciation, Depletion and Amortization 548 558 1,643 1,613
Taxes Other Than on Income 1 1,670 1,493 4,795 4,358
Interest and Debt Expense 69 93 227 274
9,079 9,798 27,591 28,622
Income Before Income Tax Expense 1,249 1,251 4,104 3,760
Income Tax Expense 522 596 1,723 1,617
NET INCOME $ 727 $ 655 $2,381 $2,143
PER SHARE AMOUNTS
NET INCOME $1.11 $1.00 $3.64 $3.28
DIVIDENDS $ .58 $ .54 $1.70 $1.54
Average Common Shares Outstanding (000's) 655,987 652,671 654,330 652,649
EARNINGS BY MAJOR OPERATING AREA (unaudited)
Third Quarter Nine Months
1997 1996 1997 1996
Exploration and Production
United States $ 193 $ 237 $ 736 $ 699
International 287 291 991 802
Total Exploration and Production 480 528 1,727 1,501
Refining, Marketing and Transportation
United States 193 80 445 281
International 11 21 159 398
Total Refining, Marketing and Transportation 204 101 604 679
Total Petroleum Operations 684 629 2,331 2,180
Chemicals 25 49 165 164
Coal and Other Minerals 16 12 37 35
Corporate and Other 2 2 (35) (152) (236)
NET INCOME $ 727 $ 655 $2,381 $2,143
1 Includes consumer excise taxes $1,487 $1,324 $4,248 $3,845
(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)
Third Quarter Nine Months
1997 1996 1997 1996
U. S. Exploration and Production $ - $ 17 $ 32 $ 8
International Exploration and Production - - 59 (7)
U. S. Refining, Marketing and Transportation - (26) (43) (37)
International Refining, Marketing and Transportation (72) - (75) 260
Chemicals (9) (12) (18) (28)
Coal and Other Minerals - (3) (2) (3)
Corporate and Other * 76 29 55 (16)
Total Special Items $ (5) $ 5 $ 8 $177
SUMMARY OF SPECIAL ITEMS (unaudited)
Third Quarter Nine Months
1997 1996 1997 1996
Asset Sales $(72) $ 21 $ 27 $296
Asset Write-offs & Writedowns (8) (12) (8) (48)
Environmental Remediation Provisions (9) (29) (35) (53)
Prior-Year Tax Adjustments 84 52 98 52
Restructurings & Reorganizations - (17) - (17)
Other, Net - (10) (74) (53)
Total Special Items $ (5) $ 5 $ 8 $177
FOREIGN EXCHANGE GAINS (LOSSES) $ 36 $ 6 $ 41 $ (14)
EARNINGS BY MAJOR OPERATING AREA EXCLUDING SPECIAL ITEMS (unaudited)
Third Quarter Nine Months
1997 1996 1997 1996
Exploration and Production
United States $ 193 $ 220 $ 704 $ 691
International 287 291 932 809
Total Exploration and Production 480 511 1,636 1,500
Refining, Marketing and Transportation
United States 193 106 488 318
International 83 21 234 138
Total Refining, Marketing and Transportation 276 127 722 456
Total Petroleum Operations 756 638 2,358 1,956
Chemicals 34 61 183 192
Coal and Other Minerals 16 15 39 38
Corporate and Other * (74) (64) (207) (220)
Earnings Excluding Special Items 732 650 2,373 1,966
Special Items (5) 5 8 177
Net Income $ 727 $ 655 $2,381 $2,143
* "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)
September 30, 1997 December 31, 1996
ASSETS:
Cash and Cash Equivalents $ 991 $ 892
Other Current Assets 6,250 7,050
Total Current Assets 7,241 7,942
Investments and Advances 4,552 4,463
Properties, Plant and Equipment-Net 22,377 21,496
Other 1,301 953
TOTAL ASSETS $35,471 $34,854
LIABILITIES:
Short-Term Debt $1,753 $2,706
Other Current Liabilities 5,572 6,201
Total Current Liabilities 7,325 8,907
Long-Term Debt and Capital Lease Obligations 4,464 3,988
Deferred Income Taxes 3,090 2,851
Reserves For Employee Benefit Plans 1,640 1,627
Deferred Credits and Other Noncurrent Obligations 1,899 1,858
TOTAL LIABILITIES 18,418 19,231
STOCKHOLDERS' EQUITY 17,053 15,623
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $35,471 $34,854
CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
Nine Months
1997 1996
OPERATING ACTIVITIES
Net Income $2,381 $2,143
Adjustments
Depreciation, depletion and amortization 1,643 1,613
Dry hole expense related to prior years' expenditures 25 39
Distributions (less) more than equity in affiliates' income (296) 66
Net before-tax (gains) losses on asset retirements and sales (178) 25
Net currency translation gains (23) (10)
Net increase in operating working capital (20) (166)
Deferred income tax provision 300 243
Other (283) (166)
Net cash provided by operating activities 3,549 3,787
INVESTING ACTIVITIES
Capital expenditures (2,669) (2,364)
Proceeds from asset sales 379 514
Net sales of marketable securities 181 335
Net cash used for investing activities (2,109) (1,515)
FINANCING ACTIVITIES
Net payments of short-term obligations (54) (415)
Proceeds from issuance of long-term debt 11 77
Repayments of long-term debt and other financing obligations (377) (419)
Cash dividends paid (1,111) (1,005)
Purchases of treasury shares 218 (34)
Net cash used for financing activities (1,313) (1,796)
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS (28) (6)
NET CHANGE IN CASH AND CASH EQUIVALENTS 99 470
CASH AND CASH EQUIVALENTS AT JANUARY 1, 1997 AND 1996 892 621
CASH AND CASH EQUIVALENTS AT September 30, 1997 AND 1996 $991 $1,091
CAPITAL AND EXPLORATORY EXPENDITURES 1 (millions of dollars)
Third Quarter Nine Months
1997 1996 1997 1996
United States
Exploration and Production $ 584 $ 299 $1274 $ 828
Refining, Marketing and Transportation 102 74 254 261
Chemicals 123 83 350 209
Other 22 20 75 66
Total United States 831 476 1,953 1,364
International
Exploration and Production 499 412 1,285 1,319
Refining, Marketing and Transportation 119 185 388 464
Chemicals 72 90 130 97
Other 35 4 45 5
Total International 725 691 1,848 1,885
Worldwide $1,556 $1,167 $3,801 $3,249
OPERATING STATISTICS 1
NET LIQUIDS PRODUCTION (MB/D):
United States 343 340 343 341
International 719 712 727 691
Worldwide 1,062 1,052 1,070 1,032
NET NATURAL GAS PRODUCTION (MMCF/D):
United States 1,796 1,857 1,872 1,853
International 580 587 580 571
Worldwide 2,376 2,444 2,452 2,424
SALES OF NATURAL GAS (MMCF/D):
United States 3,086 3,714 3,541 3,514
International 788 855 769 765
Worldwide 3,874 4,569 4,310 4,279
SALES OF NATURAL GAS LIQUIDS (MB/D):
United States 121 194 126 208
International 45 35 42 36
Worldwide 166 229 168 244
SALES OF REFINED PRODUCTS (MB/D):
United States 1,244 1,158 1,202 1,121
International 863 901 886 950
Worldwide 2,107 2,059 2,088 2,071
REFINERY INPUT (MB/D):
United States 972 971 933 954
International 544 506 568 542
Worldwide 1,516 1,477 1,501 1,496
CHEMICALS SALES & OTHER OPERATING
REVENUES (millions of dollars)2
United States $753 $647 $2,303 $2,218
International 148 130 433 458
Worldwide $901 $777 $2,736 $2,676
1 Includes interest in affiliates.2 Includes sales to other Chevron companies.

Updated: October 1997