Chevron reported in its interim update that earnings for the second quarter 2010 are expected to be higher than in the first quarter. Upstream earnings are projected to be in line with first quarter results. Downstream results, inclusive of the former Chemicals business segment, are expected to be significantly higher than the first quarter. Additionally, earnings are expected to benefit from favorable non-cash foreign currency effects due to the strengthening of the U.S. dollar in the second quarter.
Basis for Comparison in Interim Update
The interim update contains certain industry and company operating data for the second quarter 2010. 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 July 30, 2010. The reader should not place undue reliance on this data.
Unless noted otherwise, all commentary is based on two months of the second quarter 2010 versus full first quarter 2010 results.
Total U.S. net oil-equivalent production during the first two months of the second quarter decreased 20,000 barrels per day compared to the first quarter average, reflecting small declines across multiple assets. International net oil-equivalent production decreased 19,000 barrels per day, driven by planned maintenance in Kazakhstan and Canada, partly offset by continued production ramp up in Brazil.
U.S. crude oil realizations increased $1.85 per barrel to $75.17 during the first two months of the second quarter. International liquids realizations increased $3.19 per barrel to $73.24. U.S. natural gas realizations decreased $1.33 to $3.96 per thousand cubic feet compared to the first quarter. International natural gas realizations declined slightly to $4.45 per thousand cubic feet.
For the full second quarter, U.S. refining indicator margins improved from the first quarter, while international refining and worldwide marketing indicator margins were mixed. Chemical indicator margins improved between periods.
During the first two months of the second quarter, daily U.S. refinery crude-input volumes increased 28,000 barrels per day following planned maintenance. Outside the United States, refinery crude-input volumes were down 74,000 barrels per day, largely due to planned maintenance at the Cape Town refinery in South Africa.
Downstream earnings in the second quarter are expected to benefit from stronger U.S. refining margins, favorable foreign currency impacts and timing effects due to declining commodity prices between the beginning and end of the quarter. First quarter downstream results included a severance charge of $150 million associated with employee reductions.
The company's general guidance for the quarterly net after-tax charges related to corporate and other activities is between $250 million and $350 million. Due to foreign currency effects and the potential for irregularly occurring accruals related to income taxes, pension settlements and other matters, actual results may significantly differ from the guidance range. Total net charges in the second quarter are expected to be lower than the guidance range.
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