press release

Chevron's Third Quarter 1999 Net Income Up 26 Percent To $582 Million

CHEVRON'S THIRD QUARTER 1999 NET INCOME UP 26 PERCENT TO $582 MILLION; OPERATIONAL EARNINGS OF $702 MILLION INCREASED 82 PERCENT

  • Exploration and production operational earnings more than doubled from last year's third quarter
    - Average U.S. crude oil realizations rose 60 percent to $18.11 per barrel
    - Average U.S. natural gas realizations increased 29 percent to $2.48 per thousand cubic feet
    - Worldwide net oil equivalent production increased 4 percent to 1.545 million barrels per day
  • Refining, marketing and transportation operational earnings decreased 37 percent
    - Sales margins declined as raw material costs rose more sharply than product prices
  • Operating expenses declined 9 percent to $4.81 per barrel
  • Company on target to reduce cost structure $500 million by the end of the year

SAN FRANCISCO, Oct. 25, 1999 -- Chevron Corp. today announced third quarter net income of $582 million ($0.88 per share -- diluted), an increase of 26 percent from net income of $461 million ($0.70 per share -- diluted) for the 1998 third quarter. Earnings before special items of $702 million ($1.07 per share -- diluted) were up 82 percent from $386 million ($0.59 per share -- diluted) earned in last year's quarter.

Third quarter 1999 net income included net charges of $120 million for special items, compared with net benefits of $75 million in the 1998 quarter. Net special charges in the 1999 quarter were mainly for asset write-downs and the company's share of a loss on the sale of Koa Oil Co. by Caltex, a 50 percent-owned affiliate. Foreign currency losses of $7 million and $26 million were also included in net income for the 1999 and 1998 quarters, respectively.

For the first nine months of 1999, net income was $1.261 billion ($1.91 per share -- diluted), down from $1.545 billion ($2.35 per share -- diluted) for the first nine months of 1998. Excluding special items, earnings were $1.467 billion and $1.442 billion for the 1999 and 1998 year-to-date periods, respectively. Net income for the 1999 period included net special charges of $206 million, while the first nine months of 1998 included net benefits of $103 million from special items. For the 1999 nine-month period, net income included foreign currency losses of $48 million, compared with foreign currency gains of $24 million for the corresponding period in 1998.

"Higher crude oil and natural gas prices boosted third quarter earnings in our exploration and production business," Chairman and CEO Ken Derr commented. "Although this sharp rise in prices squeezed margins in our refining and marketing sector, operating earnings overall showed a solid improvement."

Also contributing to the improved earnings picture were a decline in unit operating costs and an increase in crude oil and natural gas production. Derr stated, "Our third quarter operating costs per barrel dipped below the $5 mark -- down about 9 percent from a year ago. Our worldwide oil equivalent production was up 4 percent from last year's third quarter. These improvements occurred at the same time as crude oil prices were hitting $25 per barrel for a brief period -- a level we haven't seen since early 1997."

Derr also said the company's previously announced restructuring activities continued to take shape. During the quarter, the company increased its estimate of staff reductions -- occurring between mid-1999 and mid-2000 -- by 400 to 3,100 employees. Derr noted that the costs for these additional staff reductions were offset by gains associated with payments made from the company's pension plan during the third quarter for terminated employees.

"Our restructuring activities will position Chevron to be even more flexible and efficient in order to take full advantage of future opportunities," Derr continued. "These efforts to streamline the company -- coupled with our success in growing oil and gas production while containing costs -- are key elements in our ability to remain competitive in all of our businesses worldwide."

Derr indicated that the company fully expects to hit its 1999 cost savings target of $500 million by the end of the year. He stated that through the first nine months, Chevron had already reduced its cost structure by over $400 million -- after excluding costs associated with special items and the company's growth components in the international exploration and production and international chemicals businesses. Derr said that on a companywide basis, unit operating expenses for nine months 1999 declined by about 7 percent to $5.01 per barrel compared with the same period last year.

Derr noted other recent significant events in the company:

  • Chevron acquired 100 percent of Petrolera Argentina San Jorge, a major oil and gas exploration and producing company in Argentina. Included in this acquisition was an interest in the major export pipeline to the Atlantic coast of Argentina and exploration acreage in key petroleum basins in Argentina, Colombia, Ecuador, Peru, Bolivia and Chile. San Jorge's recent gross operated production reached 78,000 barrels of oil and 40 million cubic feet of gas per day.
  • Chevron took over operatorship in Thailand of Block B8/32, in which it acquired an approximate 52 percent interest earlier this year. Production of natural gas reached over 140 million cubic feet per day in late September, while production of liquids is expected to reach 30,000 barrels per day by the end of this year.
  • In the Caspian Sea area, liquids production at the company's Tengizchevroil joint venture in Kazakhstan averaged over 215,000 barrels of crude oil per day in the third quarter, up from 183,000 barrels per day in last year's third quarter. Essential to the goal of expanding production from the Tengiz field to 700,000 barrels per day by 2010 is the completion of the pipeline under construction by the Caspian Pipeline Consortium, in which Chevron has a 15 percent interest. Commitments exceeding $1.5 billion for material purchases and contract services have been made to date to build this link from the Tengiz field to the Black Sea. Over $500 million has been expended on the project thus far. Pipeline completion is scheduled for 2001.
  • Chevron was appointed the Managing Sponsor of a six-company consortium that was selected by the Governments of Benin, Ghana, Nigeria, and Togo to develop the West African Gas Pipeline. This pipeline will be developed to link gas producers in Western Nigeria with power generation plants in the other countries, initially delivering an estimated 120 million cubic feet of natural gas per day.

Total revenues for the quarter were $10.2 billion, an increase of 32 percent from $7.7 billion in last year's third quarter. For the nine-month period, total revenues were $25.6 billion, up 10 percent from $23.3 billion in the comparable 1998 period. Revenue increases were mainly the result of higher sales realizations for refined products, crude oil and natural gas.

Exploration and Production

U.S. exploration and production net income for the 1999 third quarter was $233 million, up from $102 million in the 1998 third quarter. Special items for the 1999 third quarter included write-downs of $45 million for oil and gas properties in the Gulf of Mexico. The 1998 quarter included benefits of $18 million from special items. Excluding these effects, 1999 quarterly earnings more than tripled the 1998 quarter -- primarily the result of higher crude oil and natural gas prices and lower operating expenses.

The company's average 1999 third quarter U.S. crude oil realizations of $18.11 per barrel increased $6.80 over last year's third quarter. Average U.S. natural gas realizations of $2.48 per thousand cubic feet were 56 cents higher than in the 1998 third quarter.

Net U.S. liquids production of 321,000 barrels per day declined slightly from 323,000 barrels per day in the prior-year third quarter. The decrease in liquids production primarily resulted from property sales, as normal field production declines were offset by new production. Net U.S. natural gas production of 1.66 billion cubic feet per day declined from 1.70 billion cubic feet per day in the 1998 third quarter -- attributable to field production declines and property sales.

International exploration and production net income for the third quarter 1999 was $322 million, an increase from $161 million in the 1998 quarter. The increase in earnings reflected significantly higher crude oil and natural gas prices and additional crude-oil liftings compared with the year-ago quarter. Higher exploration expenses, including a $42 million write-off for an exploratory well in China, reduced earnings about $70 million between periods. Net international liquids production of 792,000 barrels per day increased 24,000 barrels per day from last year's third quarter. Net natural gas production for the 1999 quarter increased 46 percent to 929 million cubic feet per day, reflecting higher production in the U.K. North Sea -- where the Britannia Field began producing in August 1998; in Thailand -- as a result of the company's Rutherford-Moran acquisition in early 1999; and in Tengiz and western Canada.

Foreign currency losses were $3 million in the third quarter 1999 -- primarily in the company's U.K. operations -- compared with gains of $8 million in the 1998 quarter.

Refining, Marketing and Transportation

U.S. refining, marketing and transportation 1999 third quarter net income was $97 million, about half of the $188 million earned in the third quarter 1998. Net income for 1999 included special charges of $10 million for environmental remediation. Refined products margins declined as raw material cost increases outpaced product realizations. In addition, unplanned unit shutdowns at the Richmond, Calif., refinery had an adverse impact on earnings. The hydrocracker is under repair from damages incurred in a March 1999 fire, and the fluid catalytic cracker was taken out of operation for repairs in the current quarter as well. Third quarter 1998 earnings were reduced by insurance deductible costs for damages to the Pascagoula, Miss., refinery and other facilities resulting from Hurricane Georges.

Total refined product sales volumes were 1.357 million barrels per day in the third quarter 1999, up 3 percent from the comparable quarter last year. Chevron-branded motor gasoline sales also improved by 3 percent over last year's quarter to 559,000 barrels per day. Through the third quarter of this year, branded motor gasoline sales have increased 5 percent when compared with the same 1998 period.

International refining, marketing and transportation incurred a net loss of $21 million in the third quarter 1999, compared with a net loss of $46 million reported for the year-ago quarter. The net loss for the third quarter 1999 included the company's $31 million share of Caltex's loss from the sale of an investment in the Japanese refiner, Koa Oil Co. The 1998 third quarter net loss included the company's $43 million share of costs associated with the reorganization of Caltex's management and administrative functions. The 1999 third quarter results also included an inventory valuation gain of $14 million, gains of $12 million from the sale of marketable securities and a foreign currency gain of $1 million, compared with foreign currency losses of $26 million in the 1998 quarter, primarily in the Caltex areas of operation. Excluding the effect of the items discussed above, earnings for international downstream operations experienced a decline of $40 million from last year's quarter on lower margins and lower earnings from international shipping operations.

Total international refined products sales volumes of 892,000 barrels per day increased by 13 percent in the third quarter 1999, reflecting higher sales in the Caltex areas of operations.

Chemicals

Chemicals net income was $31 million in the 1999 quarter, compared with $14 million in last year's third quarter. Net income for the third quarter of 1998 included special charges of $5 million. The increase in earnings before special charges was the result of modest improvements in margins for the company's major chemical products and a decline in operating expenses.

All Other

All Other incurred net charges of $80 million in the third quarter 1999, compared with net income of $42 million in the comparable prior-year quarter. Third quarter 1999 included a special charge for an adjustment to the carrying value of the company's coal assets, which are held for sale. The 1998 quarter included a special gain for insurance recoveries.

Earnings before special items for the company's coal operations were $7 million in the third quarter 1999, compared with $18 million in last year's quarter.

Excluding special items and earnings from coal operations in both periods, net charges of $53 million in the third quarter 1999 were $28 million lower than the 1998 quarter. Income tax benefits and gains associated with pension plan activity were partially offset by higher interest expense.

Capital and Exploratory Expenditures

Capital and exploratory expenditures, including the company's share of affiliates' expenditures, were $2.172 billion in the 1999 third quarter, compared with $1.492 billion in the third quarter 1998. Third quarter 1999 expenditures included the acquisition of Petrolera Argentina San Jorge. Expenditures for the first nine months of 1999 were $4.781 billion, compared with $3.815 billion in the comparable period of 1998. In addition to the expenditures for the acquisition of Petrolera Argentina San Jorge in the third quarter, 1999 expenditures also included the acquisition of Rutherford-Moran in the first quarter.

Cautionary Statement Relevant to Forward-Looking Information for the Purpose of "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995.

Some of the items discussed in this earnings release are forward-looking statements relating to Chevron's operations that are based on management's current expectations, estimates and projections about the petroleum, chemical and other industries, in which the company operates. The statements included in this release are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. These include potential changes in crude oil, natural gas and other commodity prices and potential delays or other changes in work and repair schedules. Actual results could differ materially from management's estimates.


 

CHEVRON CORPORATION - FINANCIAL REVIEW

-1-

(Millions of Dollars Except Per-Share Amounts)

CONSOLIDATED STATEMENT OF INCOME
(unaudited)

Three Months

Nine Months

Ended September 30,

Ended September 30,

REVENUES:

1999

1998

1999

1998

(4)
Sales and Other Operating Revenues (1) $

9,965

$

7,561

$

24,837

$

22,779

Income from Equity Affiliates

127

13

404

294

Other Income

85

104

366

202

Total Revenues

10,177

7,678

25,607

23,275

COSTS AND OTHER DEDUCTIONS:
Purchased Crude Oil and Products

5,327

3,494

12,394

10,678

Operating Expenses

1,117

1,113

3,721

3,674

Selling, General and Administrative Expenses

357

367

1,203

896

Exploration Expenses

205

126

389

361

Depreciation, Depletion and Amortization

767

563

1,966

1,674

Taxes Other Than on Income (1)

1,181

1,145

3,402

3,296

Interest and Debt Expense

116

103

334

296

Total Costs and Other Deductions

9,070

6,911

23,409

20,875

Income Before Income Tax Expense

1,107

767

2,198

2,400

Income Tax Expense

525

306

937

855

NET INCOME $

582

$

461

$

1,261

$

1,545

PER-SHARE AMOUNTS
Earnings - Basic (2) $

.88

$

.70

$

1.92

$

2.36

Earnings - Diluted (2) $

.88

$

.70

$

1.91

$

2.35

Dividends $

.61

$

.61

$

1.83

$

1.83

Average Common Shares Outstanding (000's)
- Basic

657,190

655,033

656,268

655,122

- Diluted

660,649

657,186

659,403

657,359

NET INCOME BY MAJOR OPERATING AREA (unaudited)

Three MonthsEnded September 30,

Nine Months
Ended September 30,

1999

1998

1999

1998

(4)
Exploration and Production
United States $

233

$

102

$

378

$

293

International

322

161

659

505

Total Exploration and Production

555

263

1,037

798

Refining, Marketing and Transportation
United States

97

188

288

458

International

(21)

(46)

127

146

Total Refining, Marketing and Transportation

76

142

415

604

Chemicals

31

14

41

124

All Other (3)

(80)

42

(232)

19

NET INCOME $

582

$

461

$

1,261

$

1,545

(1) Includes consumer excise taxes $

1,023

$

973

$

2,921

$

2,813

(2) Current quarter earnings per share calculated by subtracting prior quarter year-to-date from year-to-date.
(3) Includes coal operations, interest expense, interest income on cash and marketable securities, corporate center costs,and real estate and insurance activities.
(4) Restated for accounting changes effective January 1, 1998, the net effect of which was immaterial.

 

CHEVRONCORPORATION - FINANCIAL REVIEW

-2-

(MILLIONS OF DOLLARS)

SPECIAL ITEMS BY MAJOR OPERATING AREA Three Months
Ended September 30,
Nine Months
Ended September 30,
(unaudited)

1999

1998

1999

1998

(1)
U. S. Exploration and Production $

(45)

$

18

$

(97)

$

18

International Exploration and Production

-

-

-

(3)

U. S. Refining, Marketing and Transportation

(10)

-

(14)

(13)

International Refining, Marketing and Transportation

(31)

(43)

(1)

(68)

Chemicals

-

(5)

(91)

(5)

All Other (2)

(34)

105

(3)

174

  Total Special Items $

(120)

$

75

$

(206)

$

103


SUMMARY OF SPECIAL ITEMS
Three Months
Ended September 30,
Nine Months
Ended September 30,

(unaudited)

1999

1998

1999

1998

(1)
Asset Dispositions $

(31)

$

18

$

121

$

(38)

Asset Write-offs and Revaluations

(79)

-

(122)

(68)

Environmental Remediation Provisions

(10)

(5)

(96)

(18)

Prior-Year Tax Adjustments

-

-

60

190

Restructurings and Reorganizations

-

(43)

(146)

(43)

Other, Net

-

105

(23)

80

  Total Special Items $

(120)

$

75

$

(206)

$

103

FOREIGN EXCHANGE (LOSSES) GAINS $

(7)

$

(26)

$

(48)

$

24

EARNINGS BY MAJOR OPERATING AREA EXCLUDING SPECIAL ITEMS
Three Months
Ended September 30,
Nine Months
Ended September 30,

(unaudited)

1999

1998

1999

1998

(1)
Exploration and Production
United States $

278

$

84

$

475

$

275

International

322

161

659

508

Total Exploration and Production

600

245

1,134

783

Refining, Marketing and Transportation
United States

107

188

302

471

International

10

(3)

128

214

Total Refining, Marketing and Transportation

117

185

430

685

Chemicals

31

19

132

129

All Other (2)

(46)

(63)

(229)

(155)

Earnings Excluding Special Items

702

386

1,467

1,442

Special Items

(120)

75

(206)

103

Net Income $

582

$

461

$

1,261

$

1,545

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

-3-

CHEVRON CORPORATION - FINANCIAL REVIEW
(MILLIONS OF DOLLARS)

CONSOLIDATED BALANCE SHEET

September 30,

December 31,

1999

1998

ASSETS:

(unaudited)

Cash and Cash Equivalents $

703

6,632

$

569

5,728

Other Current Assets
Total Current Assets

7,335

5,105

25,691

2,022

6,297

4,604

23,729

1,910

Investments and Advances
Properties, Plant and Equipment-Net
Other
TOTAL ASSETS $

40,153

$

36,540

LIABILITIES:
Short-Term Debt $

3,460

6,381

$

3,165

4,001

Other Current Liabilities
Total Current Liabilities

9,841

4,856

4,621

1,786

1,729

7,166

4,393

3,645

1,742

2,560

Long-Term Debt and Capital Lease Obligations
Noncurrent Deferred Income Taxes
Reserves For Employee Benefit Plans
Deferred Credits and Other Noncurrent Obligations
TOTAL LIABILITIES

22,833

19,506

17,034

STOCKHOLDERS' EQUITY

17,320

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $

40,153

$

36,540

CONSOLIDATED STATEMENT OF CASH FLOWS


Nine Months Ended September 30,

(unaudited)

1999

1998

OPERATING ACTIVITIES
Net Income $

1,261

1,966

103

(244)

(300)

37

1,632

(120)

(767)

$

1,545

1,674

38

(120)

54

(23)

(312)

377

(153)

Adjustments
Depreciation, depletion and amortization
Dry hole expense related to prior years' expenditures
Distributions less than equity in affiliates' income
Net before-tax (gains) losses on asset retirements and sales
Net foreign exchange losses (gains)
Net decrease (increase) in operating working capital
Deferred income tax provision
Other
       Net cash provided by operating activities

3,568

3,080

INVESTING ACTIVITIES
Capital expenditures

(3,423)

583

40

72

(2,779)

210

(87)

47

Proceeds from asset sales
Other investing cash flows, net
Net sales of marketable securities
   Net cash used for investing activities

(2,728)

(2,609)

FINANCING ACTIVITIES
Net borrowings of short-term obligations

Proceeds from issuance of long-term debt

127

702

(443)

(1,199)

105

1,339

176

(353)

(1,198)

(298)

Repayments of long-term debt and other financing obligations
Cash dividends paid
Net Sales (Purchases) of treasury shares
Net cash used for financing activities

(708)

(334)

EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS

2

-

NET CHANGE IN CASH AND CASH EQUIVALENTS

134

137

1,015

CASH AND CASH EQUIVALENTS AT JANUARY 1, 1999 AND 1998

569

CASH AND CASH EQUIVALENTS AT SEPTEMBER 30, 1999 AND 1998 $

703

$

1,152


CHEVRON CORPORATION - FINANCIAL REVIEW

-4-

Three Months

Nine Months

CAPITAL AND EXPLORATORY EXPENDITURES (1) Ended September 30, Ended September 30,
(millions of dollars)

1999

1998

1999

1998

United States
Exploration and Production $

224

$

336

219

134

49

$

798

$

984

475

270

167

Refining, Marketing and Transportation

96

306

Chemicals

71

244

Other

27

64

   Total United States

418

738

1,412

1,896

International
Exploration and Production

1,606

479

74

189

12

3,024

1,369

226

296

28

Refining, Marketing and Transportation

99

241

Chemicals

49

104

Other

-

-

   Total International

1,754

754

3,369

1,919

   Worldwide $

2,172

$

1,492

$

4,781

$

3,815

OPERATING STATISTICS (1)
NET LIQUIDS PRODUCTION (MB/D):
United States

321

323

768

313

332

759

International

792

799

  Worldwide

1,113

1,091

1,112

1,091

NET NATURAL GAS PRODUCTION (MMCF/D):
United States

1,664

1,703

636

1,659

1,765

613

International

929

867

  Worldwide

2,593

2,339

2,526

2,378

SALES OF NATURAL GAS (MMCF/D):
United States

3,436

3,233

1,587

3,354

3,354

1,439

International

1,884

1,823

  Worldwide

5,320

4,820

5,177

4,793

SALES OF NATURAL GAS LIQUIDS (MB/D):
United States

127

113

57

127

56

126

58

International

64

  Worldwide

191

170

183

184

SALES OF REFINED PRODUCTS (MB/D):
United States

1,357

1,319

791

1,305

1,254

805

International (2)

892

902

  Worldwide

2,249

2,110

2,207

2,059

REFINERY INPUT (MB/D):
United States

999

1,022

455

964

926

475

International

416

427

  Worldwide

1,415

1,477

1,391

1,401

CHEMICALS SALES & OTHER OPERATING
REVENUES (millions of dollars)
(3)
United States $

773

$

648

150

$

2,120

$

1,988

435

International

194

562

  Worldwide $

967

$

798

$

2,682

$

2,423

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

 

Updated: October 1999