Chevron 4Q Earnings Soar to $5.3B
Chevron reported earnings of $5.3 billion ($2.64 per share - diluted) for the fourth quarter 2010, compared with $3.1 billion ($1.53 per share - diluted) in the 2009 fourth quarter. Results in the 2010 period included gains of nearly $400 million from downstream asset sales. Foreign currency effects decreased earnings in the 2010 quarter by $99 million, compared with a decrease of $67 million a year earlier.
Full-year 2010 earnings were $19.0 billion ($9.48 per share - diluted), up from $10.5 billion ($5.24 per share - diluted) in 2009.
Sales and other operating revenues in the fourth quarter 2010 were $52 billion, up from $48 billion in the year-ago period mainly due to higher prices for crude oil and refined products.
"Financially and operationally, 2010 was an outstanding year," said Chairman and CEO John Watson. "Earnings and cash flow increased significantly in 2010 as a result of higher prices for crude oil, higher net oil-equivalent production and improved refined product sales margins. Our financial strength enabled us to invest in our attractive development projects and acquire several new resource opportunities. At the same time, we increased the annual dividend on our common shares for the 23rd consecutive year and resumed our common stock repurchase program. From an operating perspective, safety results were world-class, net oil-equivalent production for the year came in above target, and refinery reliability was strong."
Watson continued, "During the fourth quarter, we announced the acquisition of Atlas Energy, Inc., which will provide Chevron with an attractive natural gas position, primarily located in southwestern Pennsylvania's Marcellus Shale. We look forward to the results from the Atlas stockholders' meeting on February 16 and are very pleased with the talented people and assets that this acquisition will bring."
Recent upstream achievements include:
- United States - Sanctioned development of the Big Foot project in the deepwater Gulf of Mexico. Big Foot will be the company's sixth operated facility in the deepwater Gulf. Chevron has a 60 percent working interest in the project.
- Australia - Signed an additional binding Sales and Purchase Agreement with an Asian customer for Gorgon liquefied natural gas.
- Indonesia - Awarded front-end engineering and design contracts for the deepwater Gendalo-Gehem natural gas development in the Makassar Strait, offshore East Kalimantan.
- Kazakhstan/Russia - Reached agreement with the other shareholders and governing bodies of the Caspian Pipeline Consortium for expansion of the Caspian pipeline. The 935-mile pipeline carries crude oil from Western Kazakhstan to a dedicated terminal on the Black Sea in Russia.
- Republic of the Congo - Confirmed discoveries at the Bilondo Marine 2 and 3 wells within the Moho-Bilondo license. Chevron has a 31.5 percent interest in the permit area.
Watson commented that the company added approximately 240 million barrels of net oil-equivalent reserves in 2010. These additions, which are subject to final reviews, equate to 24 percent of net oil-equivalent production for the year. Included in the net additions is a 140 million barrel unfavorable effect of higher crude oil prices on certain production-sharing and variable-royalty contracts. Watson added, "We took several major deepwater projects to final investment decision in 2010, and we expect to recognize reserves for these projects in future years, consistent with Securities and Exchange Commission (SEC) rules." The company will provide additional details relating to 2010 reserve additions in its Annual Report on Form 10-K scheduled for filing with the SEC on February 24.
"In the downstream business, we successfully completed the first year of a multiyear plan to improve returns," Watson added. Efforts continued on streamlining the asset portfolio with completion of the sale of marketing businesses in three countries in southeast Africa. The company also announced an agreement to sell its fuel marketing and aviation businesses in 15 countries in the Caribbean and Central America, with closing of the transactions expected by the third quarter 2011, following receipt of required local regulatory and government approvals.
Also in the fourth quarter, the company commissioned a new continuous catalytic reformer at its Pascagoula, Mississippi refinery and announced plans to construct a 53,000-barrel-per-day heavy oil fluid catalytic cracker at the 50 percent-owned GS Caltex Yeosu Refinery in South Korea. The company's 50 percent-owned Chevron Phillips Chemical Company LLC started up polyethylene and normal alpha olefins plants at its 49 percent-owned Q-Chem II Project in Mesaieed, Qatar and announced plans to construct a 1-hexene plant capable of producing in excess of 440 million pounds per year at its Cedar Bayou Facility in Baytown, Texas.
The company purchased $750 million of its common stock in the fourth quarter 2010 under the stock repurchase program announced earlier in the year. At the end of the year, balances of cash, cash equivalents, time deposits and marketable securities totaled $17.1 billion, up over $8 billion from the end of 2009. Total debt at December 31, 2010 stood at $11.5 billion, up $1.0 billion from a year earlier.
Worldwide net oil-equivalent production was 2.79 million barrels per day in the fourth quarter 2010, up from 2.78 million barrels per day in the 2009 fourth quarter. Production increases in Brazil, China, Kazakhstan and Thailand were partially offset by normal field declines and the effect of higher prices on cost-recovery volumes and other contractual provisions.
U.S. upstream earnings of $930 million in the fourth quarter of 2010 were down $136 million from a year earlier. Higher crude oil realizations were more than offset by decreased net oil-equivalent production, higher operating expenses and higher tax items.
The company's average sales price per barrel of crude oil and natural gas liquids was approximately $76 in the 2010 quarter, compared with $67 a year ago. The average sales price of natural gas was $3.65 per thousand cubic feet, down from $4.23 in last year's fourth quarter.
Net oil-equivalent production of 698,000 barrels per day in the fourth quarter 2010 was down 53,000 barrels per day, or about 7 percent, from a year earlier. The decrease in production was associated with normal field declines and downtime for maintenance and repairs. The net liquids component of oil-equivalent production and net natural gas production both decreased approximately 7 percent in the 2010 fourth quarter to 481,000 barrels per day and 1.31 billion cubic feet per day, respectively.
International upstream earnings of $3.92 billion increased $822 million from the fourth quarter 2009. Higher prices and sales volumes for crude oil and natural gas and favorable tax items increased earnings between periods. This benefit was partly offset by higher depreciation, operating and exploration expenses, and lower gains from asset sales. Foreign currency effects decreased earnings by $53 million in the 2010 quarter, compared with a decrease of $56 million a year earlier.
The average sales price for crude oil and natural gas liquids in the 2010 quarter was $79 per barrel, compared with $68 a year earlier. The average price of natural gas was $4.81 per thousand cubic feet, up from $4.15 in last year's fourth quarter.
Net oil-equivalent production of 2.09 million barrels per day in the fourth quarter 2010 was up 3 percent, or 61,000 barrels per day, from a year ago. The increase included 76,000 barrels per day of higher production in Brazil, China, Kazakhstan, and Thailand. Partially offsetting this increase were the impacts of normal field declines and the effects of higher prices on cost-recovery volumes and other contractual provisions. The net liquids component of oil-equivalent production increased about 3 percent from a year ago to 1.47 million barrels per day and net natural gas production was up about 2 percent to 3.73 billion cubic feet per day.
Net charges in the fourth quarter 2010 were $294 million, compared with $418 million in the year-ago period. The change between periods was mainly due to lower corporate tax items. Foreign currency effects reduced net charges by $6 million in the 2010 quarter, compared with a $5 million reduction in net charges last year.
CAPITAL AND EXPLORATORY EXPENDITURES
Capital and exploratory expenditures in 2010 were $21.8 billion, compared with $22.2 billion in 2009. The amounts included approximately $1.4 billion in 2010 and $1.6 billion in 2009 for the company's share of expenditures by affiliates, which did not require cash outlays by the company. Expenditures for upstream projects represented 87 percent of the companywide total in 2010.
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