press release

ChevronTexaco Reports Second Quarter Net Income of $407 Million and Operating Earnings of $1.233 Billion

  • Exploration and production earnings decline on lower prices for natural gas and crude oil
  • Refining, marketing and transportation profits off sharply on lower refined product margins
  • Write-down of $531 million recorded for investment in Dynegy Inc.
  • Foreign currency losses reduce earnings $141 million
  • Merger synergies on track toward savings target of $2.2 billion annually before-tax by early 2003

SAN FRANCISCO, July 30, 2002 -- ChevronTexaco Corp. today reported preliminary net income of $407 million ($0.39 per share - diluted) for second quarter 2002, compared with second quarter 2001 net income of $2.108 billion ($1.99 per share - diluted). Excluding net charges for special items and merger-related expenses in both periods, operating earnings were $1.233 billion ($1.16 per share - diluted), down from $2.144 billion ($2.01 per share - diluted) in the 2001 quarter.

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Earnings Summary

Three Months
Ended June 30
Six Months
Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings
Exploration and Production $1,258 $1,176 $2,399 $3,968
Refining, Marketing and Transportation 104 670 43 1,126
Chemicals and Other (129) (242) (278) (496)
Total 1,233 2,144 2,164 4,598
Special Items (753) - (827) -
Merger Effects (73) (36) (205) (57)
Net Income $407 $2,108 $1,132 $4,541

For the six-month period, net income was $1.132 billion ($1.07 per share - diluted), compared with $4.541 billion ($4.28 per share - diluted) in 2001. Operating earnings were $2.164 billion ($2.04 per share - diluted) in 2002, versus $4.598 billion ($4.33 per share - diluted) in 2001.

Net charges for special items in the 2002 second quarter totaled $753 million. Included were $531 million for the write-down of the company's investment in its Dynegy Inc. affiliate, $100 million for the company's share of Dynegy's own write-downs and other adjustments, and $122 million for environmental remediation costs and settlement of a litigation issue. Merger-related expenses reduced earnings $73 million in the 2002 quarter.

The $531 million special-item charge represented a write-down of the company's investment in Dynegy's common and preferred stock to its estimated fair value at June 30, 2002, as required under the applicable accounting rules. Further deterioration of the securities' fair value during July was not reflected in the second quarter charge.

The remaining book value of the company's investment in Dynegy at June 30, following the second quarter write-down, was approximately $2 billion. An additional charge to third quarter earnings may be required to the extent the fair value of the Dynegy securities at Sept. 30, 2002, is below the remaining $2 billion carrying value.

Commenting on Dynegy, Chairman and CEO Dave O'Reilly said, "Despite the partial write-down of our Dynegy investment in the second quarter, we are encouraged by Dynegy's ongoing efforts to improve liquidity, including its announcement yesterday to sell Northern Natural Gas Company. We support this and other actions Dynegy is undertaking to help restore investor confidence." O'Reilly indicated that besides ChevronTexaco's ownership in Dynegy, the two companies have commercial arrangements that include Dynegy's purchase of most of the natural gas and natural gas liquids produced by ChevronTexaco in the United States, as well as ChevronTexaco's purchase of the same commodities for its plant operations from Dynegy.

In other remarks on the quarter, O'Reilly said, "Operating earnings were significantly lower than the very strong results we had in last year's second quarter. In our upstream business this year, lower natural gas and crude oil prices were the primary factors reducing earnings. In our downstream sector, sharply lower refined product margins in the United States accounted for a large portion of the profit decline." O'Reilly said that downstream profits in the year-ago quarter also included $208 million associated with assets that were required to be sold as a condition of the October 2001 merger.

"A highly successful element in this year's quarter was the earnings contribution from synergies achieved following our merger last October," O'Reilly said. "We are pleased with the tremendous progress all of our businesses are making towards the $2.2 billion before-tax objective of synergy savings by early 2003."

Adding to his comments on the upstream sector, O'Reilly said that in the United States, the average natural gas realization dropped nearly 40 percent from the year-ago quarter to $3.04 per thousand cubic feet. Internationally, the decline was almost 20 percent to $1.94. The average U.S. crude oil and natural gas liquids realization was down about a dollar per barrel to $21.75. Internationally, the corresponding decline was 7 percent to about $23. Worldwide oil-equivalent production was down 1.6 percent from the second quarter 2001. Excluding the effects of OPEC-related quotas in both periods, production between quarters was essentially flat. On this same quota-adjusted basis, production for the first half of 2002 increased slightly more than one percent from the average for the full year 2001.

Commenting on the downstream sector, O'Reilly said, "Although improved from depressed levels early this year, refined product margins remain weak -- reflective of slowed world economies.

"Overcoming these difficult downstream market conditions, while enhancing upstream profits, are the key challenges to improving our overall operating earnings," O'Reilly said. "In this first year after the merger, our employees have successfully integrated all of our businesses, and I am optimistic for the future."

O'Reilly said an example of a highly successful integration effort was the company's oil and gas exploration program. In recent months, ChevronTexaco has announced discoveries in Angola, Nigeria and China, and has performed promising follow-up appraisal drilling at its Tahiti prospect in the Gulf of Mexico.

Second quarter 2002 revenues and other income were $25.3 billion, compared with $29.7 billion in the 2001 second quarter. Revenues and other income for the first six months of 2002 were $46.5 billion, versus $59.1 billion in the comparable 2001 period. Revenues declined in both periods, mainly on lower prices for crude oil, natural gas and refined products.

Foreign currency losses included in net income were $141 million, compared with losses of $20 million in the 2001 second quarter. In 2002, fluctuations of the U.S. dollar against the currencies of most other countries in which the company has significant operations resulted in losses, with the notable exception of the Argentine peso, which was permitted to float against the dollar earlier in the year. For the six-month period, foreign currency losses were $10 million, compared with gains of $67 million in 2001.

Exploration and Production

U.S. Exploration and Production Three Months
Ended June 30
Six Months
Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings $548 $884 $852 $2,197
Special Items (12) - (12) -
Segment Income $536 $884 $840 $2,197

U.S. exploration and production operating earnings of $548 million in the 2002 quarter declined mainly due to significantly lower natural gas realizations, lower liquids realizations and a decline in oil-equivalent production. The average natural gas realization for the quarter was $3.04 per thousand cubic feet, compared with $4.80 in the year-ago period. The average liquids realization was down about 5 percent to $21.75 per barrel. Partially offsetting these unfavorable earnings impacts were lower operating and exploration expenses.

Net oil-equivalent production declined 3 percent from last year's second quarter. The net liquids production component was up 2 percent to 627,000 barrels per day. Net natural gas production averaged 2.504 billion cubic feet per day, down 10 percent from the 2001 period. Drilling and production were accelerated in 2001 to take advantage of the favorable natural gas price environment.

The second quarter 2002 special charge was for environmental remediation costs.

International
Exploration and
Production
Three Months
Ended June 30
Six Months
Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings $710 $832 $1,547 $1,771
Special Items - - - -
Segment Income $710 $832 $1,547 $1,771

International exploration and production earnings of $710 million declined about 15 percent, mostly the result of lower realizations and higher depreciation expense. These effects were partially offset by lower exploration expense.

Net oil-equivalent production was essentially unchanged from the year-ago period. The net liquids production component declined about 4 percent to 1,293,000 barrels per day. Production was lower in Indonesia, primarily related to changes in contractual terms. In Nigeria, production declined as a result of OPEC-related curtailments. The effect of OPEC quotas on Nigerian production in the 2002 quarter was 45,000 barrels per day, versus having no effect in the corresponding 2001 period. Production under certain operating service agreements, which are not included in net working interest production statistics, was also curtailed approximately 20,000 barrels per day in this year's second quarter, compared to about 10,000 barrels per day in the year-ago period. Net natural gas production increased 15 percent to 1.932 billion cubic feet per day. New production from the Philippines, along with higher production in several other countries, contributed to the increase.

Earnings for the quarter included net foreign currency losses of $62 million, compared with losses of $33 million in 2001. Currency losses in several countries, particularly Venezuela and Canada, were partially offset by gains attributable to the weakening of the Argentine peso against the U.S. dollar.

Refining, Marketing and Transportation

U.S. Refining, Marketing and Transportation Three Months
Ended June 30
Six Months
Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings (Loss) $ 56 $531 $ (98) $720
Special Items (86) - (86) -
Segment (Loss) Income $(30) $531 $(184) $720

The quarter's average refined product sales realization decreased 15 percent to $33.91 per barrel. Refined product sales volumes, excluding the company's share of Equilon and Motiva in the 2001 period, decreased 3 percent to 1,681,000 barrels per day, primarily due to a decline in sales of jet and marine fuels. Branded gasoline sales volumes increased about 4 percent to 588,000 barrels per day from the year-ago quarter.

Special items in 2002 were for environmental remediation costs and settlement of a litigation issue.

International Refining, Marketing and Transportation Three Months
Ended June 30
Six Months
Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings $ 48 $ 139 $ 141 $ 406
Special Items - - - -
Segment Income $ 48 $ 139 $ 141 $ 406

International refining, marketing and transportation earnings of $48 million declined due to lower overall refined product margins and lower freight rates for the international shipping operations. Margins declined in the Asia-Pacific and European areas of operations but improved slightly in Latin America. Total refined products sales volumes decreased 10 percent to 2,210,000 barrels per day, primarily the result of lower demand for jet fuel and residual fuel oil.

Earnings in the 2002 quarter included foreign currency losses of $102 million, compared with gains of $6 million in 2001. Currency losses in 2002 occurred mainly in Brazil, New Zealand, Australia, Korea and the United Kingdom.

Chemicals

Chemicals Three Months
Ended June 30
Six Months
Ended June 30
Millions of Dollars 2002 2001 2002 2001
Operating Earnings (Loss) $ 36 $ 27 $ 51 $ (10)
Special Items - - - -
Segment Income (Loss) $ 36 $ 27 $ 51 $ (10)

Chemical operations earned $36 million, compared with $27 million in last year's quarter. Product sales margins, while improved as a result of lower feedstock costs in 2002, remained weak.

All Other

All Other Three Months
Ended June 30
Six Months
Ended June 30
Millions of Dollars 2002 2001 2002 2001
Net Charges, Excluding Special Items
and Merger Effects
$ (165) $ (269) $ (329) $ (486)
Special Items (655) - (729) -
Merger Effects (73) (36) (205) (57)
Segment Net Charges $ (893) $ (305) $ (1,263) $ (543)

All Other consists of the company's interest in Dynegy Inc., coal mining operations, power and gasification businesses, worldwide cash management and debt financing activities, corporate administrative costs, insurance operations, real estate activities, and technology companies. Net charges before special items and merger effects were $165 million, compared to $269 million in the year-ago quarter. Lower income tax expense and corporate charges were partially offset by a decline in the company's share of Dynegy's operating earnings. Foreign currency gains were $21 million, versus $8 million in the 2001 quarter.

Special items in the 2002 quarter included charges of $531 million for the write-down of the company's investment in Dynegy, $100 million for the company's share of Dynegy's own write-downs and other adjustments, and $24 million for environmental remediation costs.

Capital and Exploratory Expenditures

Capital and exploratory expenditures totaled $4.3 billion for six months 2002, compared with $5.1 billion in 2001. Expenditures in 2002 included the acquisition of assets previously leased and an additional investment in Dynegy common stock. In 2001, expenditures included the acquisition of an additional 5 percent interest in the Tengizchevroil affiliate and higher development spending in the Gulf of Mexico related to natural gas production.

             CHEVRONTEXACO 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 AND OTHER INCOME:       2002     2001(A)       2002     2001(A)
  Sales and Other
  Operating Revenues (B)       $25,223    $29,031     $46,067    $58,061
  Income from Equity Affiliates     81        574         193        862
  Other Income                      29         89         228        216
                                25,333     29,694      46,488     59,139
COSTS AND OTHER DEDUCTIONS:
  Purchased Crude Oil
   and Products                 14,694     17,288      26,507     34,168
  Operating Expenses             1,699      1,843       3,451      3,722
  Selling, General
   and Administrative Expenses   1,153        887       2,016      1,785
  Exploration Expenses             135        249         220        411
  Depreciation, Depletion
   and Amortization              1,241      1,168       2,446      2,325
  Write-down of
   Dynegy Investment               702         --         702         --
  Taxes Other
   Than on Income (B)            4,137      3,941       7,917      7,898
  Merger-Related Expenses (C)      119         48         302         73
  Minority Interests                10         34          22         72
  Interest and Debt Expense        160        217         307        476
                                24,050     25,675      43,890     50,930
INCOME BEFORE
 INCOME TAX EXPENSE              1,283      4,019       2,598      8,209
  Income Tax Expense               876      1,911       1,466      3,668
NET INCOME                        $407     $2,108     $ 1,132     $4,541
 
PER-SHARE AMOUNTS:
NET INCOME
  Earnings - Basic               $0.39      $1.99       $1.07      $4.29
  Earnings - Diluted             $0.39      $1.99       $1.07      $4.28
 
 
NET INCOME BY MAJOR OPERATING AREA Three Months           Six Months
          (unaudited)              Ended June 30         Ended June 30
                                  2002       2001       2002        2001
Exploration and Production
  United States                   $536       $884        $840     $2,197
  International                    710        832       1,547      1,771
    Total Exploration
     and Production              1,246      1,716       2,387      3,968
Refining, Marketing
 and Transportation
  United States                    (30)       531        (184)       720
  International                     48        139         141        406
    Total Refining, Marketing
     and Transportation             18        670         (43)     1,126
Chemicals                           36         27          51        (10)
All Other (D)                     (893)      (305)     (1,263)      (543)
NET INCOME                        $407     $2,108      $1,132     $4,541
 
 
(A)Certain items were reclassified to conform to the 2002 presentation.
(B) Includes consumer
    excise taxes:               $1,751     $1,772      $3,439     $3,554
(C) Includes employee severance and other benefits associated with
    workforce reductions, professional service fees, employee and office
    relocations, facility closure costs, etc.
(D) Includes the company's interest in Dynegy Inc., coal mining
    operations, power and gasification ventures, corporate administrative
    costs, worldwide cash management and debt financing activities,
    technology investments and real estate and insurance activities.
 
 
             CHEVRONTEXACO CORPORATION - FINANCIAL REVIEW
                        (Millions of Dollars)
 
SPECIAL ITEMS AND MERGER             Three Months           Six Months
  EFFECTS(A) BY MAJOR               Ended June 30         Ended June 30
    OPERATING AREA                 2002       2001       2002        2001
     (unaudited)
 
U. S. Exploration and Production  $(12)       $--        $(12)       $--
U. S. Refining, Marketing
 and Transportation                (86)        --         (86)        --
All Other (B)                     (728)       (36)       (934)       (57)
  Total Special Items
   and Merger Effects            $(826)      $(36)    $(1,032)      $(57)
 
 
   SUMMARY OF SPECIAL               Three Months           Six Months
ITEMS AND MERGER EFFECTS           Ended June 30          Ended June 30
     (unaudited)                   2002       2001       2002        2001
 
Asset Write-offs and Revaluations
    - Write-down of
       Dynegy Investment         $(531)       $--       $(531)       $--
    - Equity share of
       Dynegy's write-offs
       and revaluations           (100)        --        (174)        --
Environmental
 Remediation Provisions            (65)        --         (65)        --
Other, Net                         (57)        --         (57)        --
  Total Special Items             (753)        --        (827)        --
Merger Effects                     (73)       (36)       (205)       (57)
  Total Special Items
   and Merger Effects            $(826)      $(36)    $(1,032)      $(57)
 
FOREIGN EXCHANGE (LOSSES) GAINS  $(141)      $(20)       $(10)       $67
 
 
 
 EARNINGS BY MAJOR OPERATING         Three Months          Six Months
AREA, EXCLUDING SPECIAL ITEMS       Ended June 30        Ended June 30
     AND MERGER EFFECTS             2002     2001       2002        2001
       (unaudited)
 
Exploration and Production
  United States                    $548      $884       $852      $2,197
  International                     710       832      1,547       1,771
    Total Exploration
     and Production               1,258     1,716      2,399       3,968
Refining, Marketing and Transportation
  United States                      56       531        (98)        720
  International                      48       139        141         406
    Total Refining, Marketing
     and Transportation             104       670         43       1,126
Chemicals                            36        27         51         (10)
All Other (B)                      (165)     (269)      (329)       (486)
    Earnings Excluding Special
     Items and Merger Effects     1,233     2,144      2,164       4,598
 
Special Items and Merger Effects   (826)      (36)    (1,032)        (57)
    Net Income                     $407    $2,108     $1,132      $4,541
 
(A) Includes employee termination and other benefits associated with
    workforce reductions, professional service fees, employee and office
    relocations, facility closure costs, etc.
(B) Includes the company's interest in Dynegy Inc., coal mining
    operations, power and gasification ventures, corporate administrative
    costs, worldwide cash management and debt financing activities,
    technology investments and real estate and insurance activities.
 
                                             June 30, 2002
SELECTED BALANCE SHEET DATA                   (unaudited)   Dec. 31, 2001
 
Cash, Cash Equivalents
 and Marketable Securities                        $3,415         $3,150
Total Assets                                     $77,642        $77,572
Total Debt                                       $16,768        $17,418
Shareholders' Equity                             $33,756        $33,958
 
 
             CHEVRONTEXACO CORPORATION - FINANCIAL REVIEW
 
CAPITAL AND EXPLORATORY EXPENDITURES (A)
      (Millions of Dollars)         Three Months          Six Months
                                   Ended June 30         Ended June 30
                                  2002       2001       2002       2001
United States
  Exploration and Production      $444       $656       $819      $1,233
  Refining, Marketing
   and Transportation              148        203        258         366
  Chemicals                         44         53         71          66
  Other                            172        470        498         563
    Total United States            808      1,382      1,646       2,228
 
International
  Exploration and Production     1,113        995      2,268       2,475
  Refining, Marketing
   and Transportation              231        228        383         403
  Chemicals                          7          8         10          12
  Other                             14          2         16           3
    Total International          1,365      1,233      2,677       2,893
    Worldwide                   $2,173     $2,615     $4,323      $5,121
 
 
                                   Three Months            Six Months
                                   Ended June 30         Ended June 30
OPERATING STATISTICS (A)          2002       2001       2002        2001
 
NET LIQUIDS PRODUCTION (MB/D):
  United States                    627        616         623        613
  International (B)              1,293      1,342       1,324      1,341
    Worldwide                    1,920      1,958       1,947      1,954
 
NET NATURAL GAS PRODUCTION (MMCF/D):
  United States                  2,504      2,783       2,506      2,835
  International                  1,932      1,675       1,940      1,724
    Worldwide                    4,436      4,458       4,446      4,559
 
SALES OF NATURAL GAS (MMCF/D):
  United States                  5,125      8,499       5,980      8,708
  International                  3,168      2,360       3,377      2,377
    Worldwide                    8,293     10,859       9,357     11,085
 
 
SALES OF NATURAL GAS LIQUIDS (MB/D):
  United States                    223        316         254        340
  International                    138        105         134        101
    Worldwide                      361        421         388        441
 
SALES OF REFINED PRODUCTS (MB/D)(C):
  United States                  1,681      1,733       1,619      1,664
  International                  2,210      2,463       2,162      2,410
    Worldwide                    3,891      4,196       3,781      4,074
 
REFINERY INPUT (MB/D)(C):
  United States                  1,041      1,009         955        952
  International                  1,115      1,132       1,141      1,138
    Worldwide                    2,156      2,141       2,096      2,090
 
(A) Includes interest in affiliates.
(B) Excludes volumes produced
    under operating service
    agreements:                     94        104          95        108
(C) Excludes volumes from Equilon and Motiva.
	

NOTICE

The conference call to discuss ChevronTexaco's second quarter 2002 earnings will take place on Tuesday, July 30, 2002, at 8:00 a.m. PDT. The conference call will be available in a listen-only mode to individual investors, media and other interested parties on ChevronTexaco's Web site at www.chevron.com under the "Investor Relations" heading. Additional financial and operating information is contained in the Investor Relations Supplement that is available under "Financial Reports" on the Website.

ChevronTexaco will post selected third quarter 2002 interim company and industry performance data on its Website on September 24, 2002, at 2:30 p.m. PDT. Interested parties may view this interim data at www.chevron.com under the "Investor Relations" heading.

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

This earnings release of ChevronTexaco Corporation contains forward-looking statements relating to ChevronTexaco's operations that are based on management's current expectations, estimates and projections about the petroleum, chemicals and other energy-related industries. Words such as "anticipates," "expects," "intends," "plans," "targets," "projects," "believes," "seeks," "estimates" and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control and are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Unless legally required, ChevronTexaco undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Among the factors that could cause actual results to differ materially are crude oil and natural gas prices; refining margins and marketing margins; chemicals prices and competitive conditions affecting supply and demand for aromatics, olefins and additives products; actions of competitors; the competitiveness of alternate energy sources or product substitutes; technological developments; future developments in the energy-trading business sector and their effects on the operations of the company and its Dynegy affiliate; inability of the company's joint-venture partners to fund their share of operations and development activities; potential failure to achieve expected production from existing and future oil and gas development projects; potential delays in the development, construction or start-up of planned projects; the successful integration of the former Chevron, Texaco and Caltex businesses; potential disruption or interruption of the company's production or manufacturing facilities due to accidents or political events; potential liability for remedial actions under existing or future environmental regulations and litigation; significant investment or product changes under existing or future environmental regulations (including, particularly, regulations and litigation dealing with gasoline composition and characteristics); and potential liability resulting from pending or future litigation. In addition, such statements could be affected by general domestic and international economic and political conditions. Unpredictable or unknown factors not discussed herein also could have material adverse effects on forward-looking statements.

Updated: July 2002