Chevron Corporation has reported net income of $6.0 billion ($2.90 per share - diluted) for the second quarter 2008, compared with $5.4 billion ($2.52 per share - diluted) in the year-ago period. Earnings in the 2007 quarter included a net gain of approximately $500 million on the sale of an investment and redemption of debt.
For the first half of 2008, net income was $11.1 billion ($5.38 per share - diluted), up 10 percent from $10.1 billion ($4.70 per share - diluted) in the first six months of 2007.
Sales and other operating revenues in the second quarter 2008 were $81 billion, compared with $54 billion in the year-ago quarter. First-half 2008 sales and other operating revenues were $146 billion, versus $101 billion in the corresponding 2007 period.
"Earnings for our upstream operations benefited from prices for crude oil that were significantly higher than a year ago," said Chairman and CEO Dave O'Reilly. "Natural-gas prices also increased between periods, contributing to a doubling of upstream profits from last year's second quarter."
"In our downstream business, the increase in the price of crude oil had an opposite effect," O'Reilly added. "The higher cost of crude oil used in the refining process was not fully recovered in the price of gasoline and other refined products. As a result, our downstream operations incurred a loss in the second quarter, with most of the loss taking place in the United States." O'Reilly said the effects of planned refinery downtime also contributed to the U.S. loss in the period.
In the second quarter of this year, the company reported capital and exploratory expenditures of $5.2 billion, compared with $4.5 billion a year earlier. Common stock buybacks in the 2008 period totaled $2 billion.
O'Reilly said continued strong cash flows from operations have enabled a record-level of reinvestment in the business. Among recent milestones for the company's major development projects was the previously announced start-up of the 68 percent-owned Agbami Field in Nigeria. The total maximum oil-equivalent production at Agbami is estimated at 250,000 barrels per day by the end of 2009.
UPSTREAM - EXPLORATION AND PRODUCTION
Worldwide oil-equivalent production was 2.54 million barrels per day in the second quarter 2008, compared with 2.63 million barrels per day in the corresponding period in 2007. Absent the impact of higher prices on volumes recoverable under certain production-sharing and variable-royalty contracts outside the United States, production increased slightly between periods.
U.S. upstream income of $2.2 billion in the second quarter 2008 increased nearly $1 billion from the same period last year, driven by higher prices for crude oil and natural gas. Partially offsetting the benefit of higher prices were increases in operating expenses, the impact of lower production and the absence of gains on second quarter 2007 asset sales.
The average sales price per barrel of crude oil and natural gas liquids was $109 in the second quarter 2008, up from $57 in the corresponding 2007 period. The average sales price per thousand cubic feet of natural gas increased $3.28 between quarters to $9.84.
Net oil-equivalent production was 702,000 barrels per day in the 2008 second quarter, down about 7 percent from a year earlier on normal field declines. The net liquids component of production was down 6 percent at 438,000 barrels per day, and net natural-gas production declined 7 percent to 1.6 billion cubic feet per day.
International Upstream
International upstream earnings of $5.1 billion in the second quarter 2008 increased $2.6 billion from the year-ago period due primarily to higher prices for crude oil. Natural-gas prices also increased between periods. Partially offsetting the benefit of higher prices was a reduction of crude-oil sales volumes. Foreign currency effects benefited earnings by $80 million in the 2008 quarter, compared with a $111 million reduction to earnings a year earlier.
The average sales price per barrel of crude oil and natural gas liquids was $110 in the 2008 quarter, up $49 from the year-ago period. The average sales price per thousand cubic feet of natural gas increased $1.80 between periods to $5.44.
Net oil-equivalent production of 1.84 million barrels per day in the 2008 second quarter was about 2 percent lower than the year-ago quarter. Absent the impact of higher prices on volumes recoverable under certain production-sharing and variable-royalty contracts, production increased between periods. The net liquids component of production decreased by 95,000 barrels per day to 1.23 million. Natural-gas production was 3.6 billion cubic feet per day in the 2008 period, an increase of about 300 million cubic feet per day from a year earlier.
DOWNSTREAM - REFINING, MARKETING AND TRANSPORTATION
U.S. downstream incurred a loss of $682 million in the second quarter 2008, compared with income of $781 million in the year-ago period. The loss was mainly associated with sharply higher costs of crude-oil feedstocks used in the refining process that could not be fully recovered in the sales price of gasoline and other refined products. Operating expenses were also higher between periods, including expenses associated with planned shutdowns for refinery maintenance.
Refinery crude-input of 816,000 barrels per day in the second quarter 2008 was 65,000 barrels lower than the year-ago period. The decline was primarily due to the effects of a planned crude-unit shutdown for maintenance at the company's refinery in Pascagoula, Mississippi, and suspension of crude processing for asphalt production at the refinery in Perth Amboy, New Jersey. Crude-input volumes increased between periods at the refinery in El Segundo, California.
Refined-product sales volumes declined 8 percent from the second quarter of 2007 to 1.38 million barrels per day, primarily the result of lower gasoline and gas-oil sales. Branded gasoline sales volumes were down 5 percent between quarters to 596,000 barrels per day.
International Downstream
International downstream incurred a loss of $52 million in second quarter 2008, compared with income of $517 million in the corresponding 2007 period. Margins on the sale of refined products were significantly lower in most areas, due mainly to an increase in costs for crude-oil feedstocks. Foreign currency effects benefited earnings by $46 million in the 2008 quarter, compared with a $35 million reduction in earnings a year earlier.
Refinery crude-input was 952,000 barrels per day in the 2008 second quarter, up 10,000 from the year-ago period. Volumes increased at the GS Caltex refinery in South Korea and the company's refinery in Cape Town, South Africa. Inputs were lower at the company's Pembroke refinery in the United Kingdom due to unplanned shutdowns.
Total refined-product sales volumes of 2.07 million barrels per day in the 2008 second quarter were 6 percent higher than the corresponding quarter of 2007. Excluding the impact of 2007 asset sales in Europe, sales volumes were up 8 percent between periods on increased trading activities.
CHEMICALS
Chemical operations earned $41 million in the second quarter of 2008, compared with $104 million in the year-ago quarter. Earnings of the 50 percent-owned Chevron Phillips Chemical Company LLC (CPChem) and Chevron's Oronite subsidiary were both lower between periods. CPChem margins on the sale of commodity chemicals were squeezed due to higher feedstock costs. Utility expenses increased as a result of higher natural-gas prices, and maintenance expenses increased due to planned shutdowns at various U.S. manufacturing facilities. For the Oronite subsidiary, margins on sales of lubricant additives and fuel additives were lower between periods.
ALL OTHER
All Other consists of 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 Inc. prior to its sale in May 2007.
Net charges in the second quarter 2008 were $580 million, compared with income of $339 million in the year-ago period. The year-ago period included a $680 million gain on the sale of the company's investment in Dynegy, a $160 million loss on the redemption of debt and net favorable corporate tax items. Results in 2008 included net unfavorable corporate tax items and increased charges for environmental remediation costs associated with sites that previously had been closed or sold.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures in the first six months of 2008 were $10.3 billion, compared with $8.6 billion in the corresponding 2007 period. The amounts included approximately $900 million and $1.1 billion, respectively, for the company's share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream projects represented 82 percent of the companywide total in 2008.
