Chevron Expects 3Q Earnings to Exceed Previous Quarter's

Chevron Corporation has reported in its interim update that it expects third quarter 2008 earnings to exceed those of 2008’s second quarter.

Upstream earnings are expected to decline between quarters, in part due to the effect of September hurricanes, as well as lower commodity prices.

Basis for Comparison in Interim Update

The interim update contains certain industry and company operating data for the third quarter 2008. The production volumes, realizations, margins and certain other items in the report are based on a portion of the quarter and are not necessarily indicative of Chevron's quarterly results to be reported on October 31, 2008. The reader should not place undue reliance on this data.

Unless noted otherwise, all commentary is based on two months of the third quarter 2008 vs. full second quarter 2008 results.


The table that follows includes information on production and price indicators for crude oil and natural gas for specific markets. Actual realizations may vary from indicative pricing due to quality and location differentials and the effect of pricing lags. International earnings are driven by actual liftings, which may differ from production due to the timing of cargoes and other factors.

Total U.S. production declined about 1 percent during the first two months of the third quarter. However, hurricanes in the Gulf of Mexico are expected to reduce oil-equivalent production in the United States for the month of September by about 150 thousand barrels per day. International liquids production fell nearly 6 percent in the first two months of the third quarter, primarily due to facilities downtime associated with the expansion project and annual turnaround activities at the Tengiz Field in Kazakhstan. The Tengiz Field expansion project was completed in late September.

Directionally, international liquids liftings are expected to be lower in the full third quarter than in the second quarter.

During the first two months of the third quarter, U.S. crude oil realizations rose more than $5 per barrel to $119.20, while the West Texas Intermediate benchmark price increased about $1.50 per barrel compared to the second quarter. This difference largely reflects Gulf of Mexico production that is priced on a lagged basis. International liquids unit realizations in July and August declined slightly from the second quarter. U.S. natural gas realizations decreased $0.31 to $9.53 per thousand cubic feet during the first two months of the third quarter, while international natural gas realizations fell $0.15 to $5.29 per thousand cubic feet. Worldwide realizations for crude oil and natural gas in September 2008 are expected to be lower than those of July and August.

In addition to hurricane-related production curtailments, third quarter results will also include an estimated $400 million in charges for incremental costs to abandon toppled platforms, asset write-offs, and initial expenses associated with the repair of facilities. Preliminary projections suggest that approximately 5 MBD of oil-equivalent production will be permanently shut-in as a result of facilities damage from the September hurricanes.

Partly offsetting these costs are gains of roughly $350 million on the sale of the company’s 9.2% interest in the K2 development, along with other asset sales in the Gulf of Mexico.



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