Chevron Corporation has reported net income of $4.9 billion ($2.32 per share - diluted) for the fourth quarter 2007, compared with $3.8 billion ($1.74 per share - diluted) in the year-ago period. For the full year 2007, net income was $18.7 billion ($8.77 per share - diluted), up 9 percent from $17.1 billion ($7.80 per share - diluted) in 2006.
"Fourth quarter earnings for our upstream business benefited from a significant increase in the price of crude oil," said Chairman and CEO Dave O'Reilly. "However, downstream profits were off sharply because of planned and unplanned refinery downtime in the United States, as well as the impact of higher crude-oil costs that were not fully recovered in the sales price of refined products.
"Our results overall capped a successful year for our company," O'Reilly added. "We achieved record earnings in 2007 and invested a record $20 billion in our excellent queue of capital and exploratory projects. Our financial strength also enabled us to increase the common stock dividend payment for the 20th consecutive year and buy back $7 billion of our common shares."
In the fourth quarter, O'Reilly indicated significant progress was made on strategic milestones that are important to the company's future success:
Upstream
• Angola - Made the final investment decision with partners to construct a liquefied natural gas (LNG) plant, to be owned 36 percent by Chevron. It will be designed with a capacity to process one billion cubic feet of natural gas per day and produce 5.2 million metric tons a year of LNG and related products.
• China - Signed a 30-year production-sharing contract with China National Petroleum Corporation to assume operatorship and hold a 49 percent interest in the development of the Chuandongbei natural gas area in central China.
• Kazakhstan - Initiated production from the first phase of the expansion projects at the 50 percent-owned Tengiz Field, which increased production capacity by 90,000 barrels of crude oil per day to approximately 400,000.
• Thailand - Signed an agreement to increase daily sales of natural gas by 500 million cubic feet to 1.2 billion by 2012 from company-operated offshore Blocks 10 through 13, for which 10-year lease extensions had earlier been received and in which Chevron has ownership interests ranging from 60 percent to 80 percent.
Downstream
• South Korea - Commissioned new facilities associated with a $1.5 billion upgrade of the 50 percent-owned GS Caltex Yeosu Refinery, enabling the refinery to process heavier and higher-sulfur crude oils and increase the production of gasoline, diesel and other light products.
• United States - Completed the second phase of modifications at the refinery in El Segundo, California, also enabling the processing of heavier crude oils into light transportation fuels and other refined products.
UPSTREAM - EXPLORATION AND PRODUCTION
Worldwide oil-equivalent production was 2.61 million barrels per day in the fourth quarter 2007, down 42,000 barrels per day from the corresponding 2006 period. Approximately 25,000 barrels per day of the decline was associated with the impact of higher prices on cost-recovery and variable-royalty volumes under provisions of certain production contracts outside the United States.
U.S. Upstream
U.S. upstream income of $1.38 billion in the fourth quarter increased $492 million from the 2006 period, due mainly to an increase in the price of crude oil. This benefit to income was partially offset by a decline in oil-equivalent production and an increase in operating, exploration and depreciation expenses.
The average sales price per barrel of crude oil and natural gas liquids was approximately $79 in the fourth quarter 2007, an increase of about $28 from the corresponding 2006 period. The average sales price of natural gas increased about 18 cents per thousand cubic feet to $6.08.
Net oil-equivalent production of 730,000 barrels per day declined 4 percent from the 2006 quarter. Net liquids production of 451,000 barrels per day was about 3 percent lower. Net natural gas production was down 6 percent to approximately 1.68 billion cubic feet per day, due mainly to normal field declines.
International Upstream
International upstream earnings of $3.46 billion increased $1.44 billion from the fourth quarter 2006, due mainly to higher prices for crude oil. Partially offsetting this benefit to income were lower crude oil sales volumes due to the timing of certain cargo liftings and higher operating expenses. Results for the 2007 quarter also included approximately $150 million of favorable tax items, including the effect of a tax-law change in Canada reducing the corporate income tax rate.
The average sales price for crude oil and natural gas liquids in the 2007 quarter increased $29 per barrel from a year earlier to about $80, while the average price of natural gas was up 65 cents to $4.32 per thousand cubic feet.
Net oil-equivalent production of 1.88 million barrels per day in the 2007 fourth quarter was essentially flat from a year earlier. Increased output in Bangladesh, Trinidad and Tobago, and Thailand was offset by lower production in Canada, Nigeria and Indonesia. The net liquids component of production, including volumes produced from oil sands in Canada, declined about 5 percent to 1.32 million barrels per day, while net natural gas production increased 11 percent to 3.41 billion cubic feet per day.
DOWNSTREAM - REFINING, MARKETING AND TRANSPORTATION
U.S. Downstream
U.S. downstream incurred a loss of $55 million in the fourth quarter 2007, compared with income of $343 million a year earlier. The swing from profit to a loss was mainly the result of market conditions that prevented the full recovery of higher crude-oil costs in the price of refined products, the adverse effects of refinery downtime and higher operating expenses. The 2007 quarter included a gain on the sale of the company's credit card operations.
Refined-product sales volumes were 1.42 million barrels per day in the fourth quarter 2007, down 3 percent from a year earlier. Branded gasoline sales volumes were relatively flat between quarters at 620,000 barrels per day.
Refinery crude input was down 78,000 barrels per day, primarily due to the ongoing effects of an August 2007 fire at the refinery in Pascagoula, Mississippi. The crude unit is expected to be back in service late in the first quarter 2008, as planned. Despite this outage, the company has been able to maintain uninterrupted product supplies to customers through the use of other feedstocks in its gasoline-producing facilities at the refinery.
International Downstream
International downstream earned $259 million in the 2007 quarter, a decrease of about $350 million from the year-ago period due mainly to lower margins on the sale of refined products and higher operating expenses.
Total refined-product sales volumes of 2.05 million barrels per day were 2 percent lower than last year's quarter, reflecting the impact of asset sales between periods.
Refinery crude input was up 40,000 barrels per day, primarily due to the effect of major planned maintenance that occurred during the 2006 fourth quarter at the Pembroke Refinery in the United Kingdom. Crude inputs also increased at the 50 percent-owned refinery in Yeosu, South Korea, following a major expansion and upgrading project. Partly offsetting these higher inputs was the impact of a sale of the company's interest in a Netherlands refinery in the first quarter 2007.
CHEMICALS
Chemical operations earned $69 million in the 2007 fourth quarter, compared with $124 million a year ago. Margins were lower on sales of commodity chemicals by the 50 percent-owned Chevron Phillips Chemical Company LLC and on sales of lubricant and fuel additives by the company's Oronite subsidiary.
ALL OTHER
All Other includes mining operations, power generation businesses, worldwide cash management and debt financing activities, corporate administrative functions, insurance operations, real estate activities, alternative fuels and technology companies, and the company's interest in Dynegy prior to its sale in May 2007.
Net charges in the fourth quarter 2007 were $237 million, up $22 million from the corresponding period in 2006. The benefit of favorable tax items in the 2007 quarter was more than offset by an increase in charges for litigation matters and other corporate expenses.
SALES AND OTHER OPERATING REVENUES
Sales and other operating revenues in the fourth quarter 2007 were $60 billion, up approximately $14 billion from a year earlier. For the full year 2007, sales and other operating revenues of $214 billion were up from $205 billion in the year-ago period.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures for the year 2007 were $20 billion, compared with $16.6 billion in the corresponding 2006 period. The amounts included approximately $2.3 billion and $1.9 billion, respectively, for the company's share of expenditures by affiliates, which did not require cash outlays by Chevron's consolidated companies. Expenditures for upstream projects represented about 78 percent of the companywide total in 2007.
