Chevron has reported in its interim update that earnings for the first quarter 2009 are expected to be sharply lower than in the fourth quarter 2008. Upstream earnings are expected to decline substantially, in part due to lower prices for crude oil and natural gas.
Downstream earnings are also anticipated to be much lower than in the previous period, with average margins on the sale of refined products off significantly.
Basis for Comparison in Interim Update
The interim update contains certain industry and company operating data for the first quarter 2009. 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 May 1, 2009. The reader should not place undue reliance on this data.
Unless noted otherwise, all commentary is based on two months of the first quarter 2009 versus full fourth quarter 2008 results.
UPSTREAM - EXPLORATION AND PRODUCTION
Total U.S. oil-equivalent production during the first two months of the first quarter improved 41,000 barrels per day mainly due to increased production in the Gulf of Mexico that was associated with ongoing restoration activities following the hurricanes last September and the ramp-up of production at Blind Faith.
International oil-equivalent production increased 64,000 barrels per day. The liquids component of oil-equivalent production increased 48,000 barrels per day primarily due to the continued ramp-up of production from the expansion project at the Tengiz Field in Kazakhstan and at the Agbami Field offshore Nigeria. Also contributing was the impact of lower crude-oil prices on the company’s share of production associated with production-sharing contracts and variable-royalty agreements. International natural-gas production increased nearly four percent.
U.S. crude-oil realizations for the first two months of the first quarter declined about $18 per barrel to $33.37. International liquids realizations fell approximately $9 to $37.78 per barrel. U.S. natural-gas realizations decreased $0.78 to $4.45 per thousand cubic feet while average international natural-gas realizations fell $0.77 per thousand cubic feet to $4.33.
U.S. upstream results in the first quarter are expected to include charges of approximately $100 million for write-offs mainly associated with exploration activities, while the fourth quarter included a gain of approximately $600 million from an asset-exchange transaction. Also in the fourth quarter, international upstream earnings included a nearly $650 million benefit from foreign-exchange effects.
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