Chevron has reported in its interim update that earnings for the fourth quarter 2008 are expected to be significantly lower than in the 2008 third quarter. The company indicated that most of the decline is associated with lower prices for crude oil and natural gas that negatively affect earnings for the upstream business.
Basis for Comparison in Interim Update
The interim update contains certain industry and company operating data for the fourth 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 January 30, 2009. The reader should not place undue reliance on this data.
Unless noted otherwise, all commentary is based on two months of the fourth quarter 2008 versus full third quarter 2008 results.
UPSTREAM - EXPLORATION AND PRODUCTION
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.
1 The Avg. Brent Spot Price is based on Platts daily assessments, using Chevron’s internal formula to produce a quarterly average. Previously it was based on daily prices provided by WSJ Market Data Group.
Total U.S. oil-equivalent production during the first two months of the fourth quarter was 39,000 barrels per day lower than in the third quarter due mainly to the residual impact of the September hurricanes in the Gulf of Mexico. International liquids production increased roughly 10 percent, primarily the result of the completion of the expansion project and annual turnaround activities at the Tengiz Field in Kazakhstan, along with the continued ramp-up of production at the Agbami Field offshore Nigeria.
U.S. crude oil realizations for the first two months of the fourth quarter declined about $50 per barrel to $61.70. International liquids unit realizations of $53.29 per barrel for the two-month period were also approximately $50 per barrel lower. Crude-oil realizations worldwide in December 2008 are expected to be significantly lower than the average for October and November. U.S. natural gas realizations decreased $3.66 to $4.98 per thousand cubic feet during the first two months of the fourth quarter, while average international natural gas realizations were off slightly to $5.30 per thousand cubic feet.
U.S. upstream earnings in the fourth quarter are expected to benefit by about $625 million from an asset-exchange transaction. U.S. earnings in the third quarter included gains of $350 million on asset sales. Additionally, full fourth quarter hurricane-related charges are projected to be lower than in the third quarter.
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